Krispy Kreme Doughnuts' (NYSE: KKD) stock has had a nice run of late. It's doubled so far on the year-to-date frame. Is there something to this story? Before, there was nothing. Krispy Kreme has been a very troubled business, and it would be very difficult to convince me otherwise. But, have things changed?
Well, net income did drop in Q1. Krispy Kreme said it made t $0.03 per share. Last year at this time, the doughnut guru earned $0.06 per share. Although the profit decline isn't attractive, I liked the comps. Same-store sales at company locations increased over 2%.
I'll say this: at least we're talking about profits and not losses. When you juxtapose such news with a strong stock, you do begin to wonder if Krispy Kreme is a successful turnaround in the making.
Unfortunately, I just don't think that investors should waste their time speculating on this business. I'd rather see a full, solid rebound in terms of fundamentals before putting my money down on the company. Granted, as others have said about these types of situations, if you don't speculate now, then you'll be missing out on a lot of the gains to come. Very true.
They call it speculation for a reason, keep in mind. It's all about the risk. I don't have unequivocal confidence in Krispy Kreme's current management. And I think you always have to weigh any investing idea with alternative arguments. For instance, while you could bet on a Krispy Kreme turnaround, you could also bet on Starbucks Corporation (NASDAQ: SBUX) returning to its former glory. Both are risky scenarios, but I'd argue that Starbucks is much less risky.
I'll continue to monitor Krispy Kreme. But it is still far from a buy in my opinion, no matter what the rise in its stock seems to imply.
Disclosure: I don't own any company mentioned; positions can change without notice.
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Reader Comments (Page 1 of 1)
6-04-2009 @ 5:20PM
Wewtaco said...
About 2 years ago or so, they closed down the only krispy kreme store in my city. I miss it so much, I loved getting a dozen there every once in a while. I hope they bring it back.