Brother, can you spare a nickel?

In a sign of the oh-so-like- the-Great-Depression times, Krispy Kreme Doughnuts (NYSE: KKD) franchises in Seattle, Washington and Portland, Oregon, along with other related franchisees in the Pacific Northwest and Hawaii, are selling coffee for five cents. The one-per-customer-per-visit bargain is being named the Krispy Kreme New Deal.

I love the concept. Dunkin Donuts has been offering lattes and breakfast sandwiches for 99 cents in the afternoons to boost traffic in the slow time; and Starbucks (NASDAQ: SBUX) is about to roll out a "gold card" good for 10% discounts on all products. The card, which carries a $25 annual membership fee, is not a credit card but is a parallel program with the regular Starbucks gift card, which allow you to receive bonuses (a free flavoring or other upgrade for your latte beverage, for instance).

Unfortunately, the two simultaneous and mutually exclusive card programs are confusing and a scant benefit. Customers used to buy 10, get one free punch cards at independent coffee houses will see quickly that paying for a 10% discount is hardly a great deal.

A private equity group unfamiliar to the stock market world claims to have made a bid to acquire struggling donut maker Krispy Kreme (NYSE:KKD). According to The Winston-Salem Journal, MGL Asset Management Group has offered $7.25 a share for the company, a premium of almost $2 a share over its closing price Monday.

The mystery surrounding MGL, its assets, ownership and ambitions have caused some to meet the proposal with skepticism. The company provides almost no information on its web site, and its spokesperson told the Journal that the bid was legit, but declined to elaborate.

The skepticism about this offer seems to stem from the wisdom and timing of such an acquisition. Although KKD just reported its first profitable quarter in over three years, overall, since selling in the $50 range before the carb craze, it has waffled ever since below the $10 mark, bottoming out at $2.50 a share just last November.

At a shareholder meeting recently, the CEO of Krispy Kreme reiterated the company's plans to build international business and increase the range of snack foods sold in convenience stores. Neither option, in my opinion, is likely to have a strong impact on the company's bottom line in the near future, if at all. One profitable quarter after three and a half years of losses in a company with a tired brand doesn't whet my appetite.

I wonder what drives MGL's interest? Perhaps they're looking at the hole picture, with a glazed look in their eyes.

Say what you want about the tasty warmth of its fresh-from-the-fryers glazed confections, Krispy Kreme Doughnuts (NYSE: KKD) hasn't been leading the sweet life of late. Beleaguered and beaten down in the midst of what CNN Money calls a "sputtering turnaround effort," the company remains challenged with an anemic share price, struggling sales, and folding franchise locations.

Today, Chief Executive Daryl Brewster, who took the reins in March 2006, announced plans to retire for personal reasons. Brewster will leave his post at the end of this month. The board quickly named James Morgan, board member since 2000 and chairman of the board since 2005, to take the vacated seat.

In other news, Krispy Kreme has followed the lead of many fast-food concerns to announce that all products sold in the U.S. are now free of trans fats. KKD officials said it has been introducing zero-grams trans fat products across the country during the past several months.

Investors are cheering this combination of news, as the stock has spiked 9.5% in today's trading. Of course, given the stock's current price (around the $3 level), this represents an absolute increase of 27 cents per share.

Beth Gaston Moon is an analyst at Schaeffer's Investment Research.

Shares of doughnut chain Krispy Kreme (NYSE: KKD) are surging today as the company reported its loss had narrowed to $798,000, or 1 cent a share, in the third quarter ended October 28, from $7.2 million, or 12 cents a share, a year earlier. For the last four years the Krispy Kreme stock has been as tasty for investors as a week-old doughnut lying around uncovered. After trading in the upper $40s a few years ago, the stock has been hit by healthier eating trends, mismanagement, and even bankruptcy by some of its franchisees.

For full disclosure, I try my best to help the stock, as I buy the doughnuts whenever possible, as I think they are awesome. For me, nothing's like a glazed Krispy Kreme.

Notwithstanding today's surge in the stock, the outlook for the company is murky at best. It said that there will be more store closures which will impact revenues. Its balance sheet is nothing to write home about either. As of October 28, the company had about $23 million in cash on its balance sheet, and $88 million in debt. It had about $11 million in additional debt capacity available under its credit facilities.

While I probably wouldn't get near the stock until we see continued evidence of a turnaround in their financials, I would jump at the chance of getting another dozen to eat while I write my next few posts! What's your favorite flavor?

Aaron Katsman is the lead Portfolio Manager and Managing Director of America Israel Investment Associates, LLC. and Senior Editor of IsraelNewsletter.com. Disclosure: Writer has no position in any stock mentioned as of 12/6/07.

Just when I thought flying couldn't become more unpleasant comes word that US Airways (NYSE:LCC) passengers will have to fly over New Mexico dry. Apparently, the airline is in a tiff with the state's alcohol regulators, who have refused to give them a permit to serve booze while in or over the state. Apparently, the state extends into orbit.

Stuck for what to bring to that Thanksgiving potluck? I'm thinking a cheesecake would be nice, but...I wish there was a way to make it a little more fattening. Thankfully, Lisa Robertson of North Carolina showed me the way with her award-winning Krispy Kremey White-Chocolate Raspberry-Filled Cheesecake, which uses Krispy Kreme (NYSE:KKD) donuts for its crust.

If you had a target of $11 on Krispy Kreme (NASDAQ: KKD) when the stock was at $6.33 and then the company reported a horrible quarter and the stock tanked more than 38%, what would you?

If you're CIBC, you would issue an "oops", but still manage to maintain an authoritative tone. CIBC "removed" their price target of $11. Not lowered, just removed. Poof. Gone!

The analyst pointed out, quite correctly, that many of the cures management talked about in the earnings release and on the conference call have already been tried or are currently in place. The company is also facing a liquidity crunch, and declining revenues are doing little to help that.

Shares of Krispy Kreme (NASDAQ: KKD) tanked more than 38% today after the beleaguered donut chain reported a terrible quarter.

Revenue fell 7.5%, and the company lost $27 million, compared with $4.6 million in the same quarter of last year. Results were hurt by impairment charges and lease termination costs as the company closes underperforming locations. The shares closed at their low for the day, $3.91, which is roughly the lowest the shares have traded in the company' history. The stock had traded at over $12 as recently as January.

Analysts quoted in the latest AP coverage of this mess have a hard time being optimistic. As BB&T Capital Markets analyst Andrew P. Wolf said, "the nascent turnaround at the company has (at best) stalled."

Hmm. Krispy Kreme's CEO Daryl Brewster talked about the company's turnaround plans, and added that "The only things nonnegotiable are our consumers, our brand and our quality."

But the company's overly-aggressive expansion may have hurt its brand and quality: Are donuts available at grocery stores and kiosks really something you associate with a premium brand?

It's great that the current management is focused on the brand, but overexpansion may hurt that image beyond repair. And although takeover rumors have surrounded the company since its decline began, it really doesn't look all that cheap, even after the decline.

In a blog post today, MarketWatch's Herb Greenberg wonders about the company's solvency: "Especially troubling is the company's concession that for the six months it's not in compliance with EBITDA covenants with its lenders -- not good when cash and cash flow are going down, as is the case at Krispy Kreme."

Restructuring would appear to be a real possibility at some point, and dieters as well as investors would do probably do well to avoid Krispy Kreme for now.

Americans are having a love affair with anything that contains even a hint of fruit. Consumer demand is so high, the U.S. is on a pace to roll out a record number of products that claim to have fruit content, according to Datamonitor. There have been over 240 fruit-related products launched in the past six months alone, compared to 124 in all of 2000.

Marketers have taken the fruit craze so seriously that Kraft Foods Inc. (NYSE: KFT) will launch nine products in 27 fruity varieties this year. Other products include PepsiCo Inc.'s (NYSE: PEP) Frito-Lay brand Flat Earth Baked Fruit Crisps, with half a serving of fruit per ounce. Kraft's Jell-O is launching its first ready-to-eat Jell-O cut with fruit pieces, aptly named Fruit Passions. Baskin-Robins' has come out with a kid-friendly mixed berry blend called Penguin Swirl that turns your tongue black.

The fruit craze comes two years after the government changed the Food Pyramid's recommended level of fruit and vegetable consumption, which created greater demand. Tom Vierhile, director of Datamonitor's Productscan Online, told USA Today that some marketers may also be looking for ways to get their banned products back in schools. "Fruit gives a positive that marketers can talk up."

But schools, as well as the general public, need to be savvy label readers. While some new products might be"fruit-infused," they're not always healthy. Krispy Kreme's (NYSE: KKD) jelly-filled donuts could never be seen as a "healthier alternative" to those delicious creme-filled donuts. What ever happened to a good ol' piece of fruit? Caveat cenator.

Krispy Kreme Doughnuts (NYSE: KKD) announced today that it will be launching a new "Multigrain cake doughnut made with seven grains and topped with an oatmeal crisp crunch. For a limited time, customers can enjoy this delicious treat made with molasses, brown sugar and pecan flavors."

The doughnut will debut on July 9, but the announcement doesn't appear to have budged Krispy Kreme's shares, a fact lamented by MarketWatch this morning: "Once upon a time, Krispy Kreme could generate levels of media hype close to those that Apple manages for every gizmo launch. Sadly for the doughnut maker's shareholders, however, those days are long gone."

So too is most of Krispy Kreme's shareholder value since it soared into the $40's a few years ago. Accounting and management scandals along with overly-aggressive expansion have let most out of the air out of this once-hot growth darling. But there may be a reason for optimism.

The company's largest shareholder, Mohamed Abdulmohsin Al Kharafi & Sons WLL, a Kuwaiti-based firm led by the Al Kharafi family, has increased its stake 20% recently, and now controls 11.4% of the company. The confidence of a large shareholder (which also agreed to a deal to develop franchises in the Middle East) might be a reason to at least give Krispy Kreme a look.

But as far as the shares have fallen since their heyday, they still don't look that cheap at 1.28 times sale for a company that isn't profitable.

MAJOR PAPERS:

• Mohamed Abdulmohsin Al Kharafi & Sons WLL, a Kuwaiti-based firm led by the Al Kharafi family, recently bought 1.25 million shares of Krispy Kreme Doughnuts Inc (NYSE: KKD) and now owns 7.37, or 11.4% of Krispy Kreme, according to Barron's Online's "Inside Scoop" section.
• The board of Dow Jones & Company Inc (NYSE: DJ) is taking over talks on the company's future, reported the Wall Street Journal, which added in a different article that Brad Greenspan, the former CEO of MySpace says he will seek a non-controlling stake in Dow Jones through a $60-per-share Dutch auction.
• The Wall Street Journal reported that the London Exchange is discussing a possible merger with Italian stock exchange operator Borsa Italiana.

OTHER PAPERS:

• The Telegraph reported that state-run Russian gas company Gazprom (OTC: OGZPY) wants to nix an Exxon Mobil Corporation (NYSE: XOM)-led project to supply Russian gas to China.
• The Telegraph also reported that Vodafone Group plc (NYSE:VOD) will have to pay about $900 million to avoid having its stake in Verizon Wireless reduced by 1%, as joint venture partner Verizon Communications Inc (NYSE: VZ) has the right to increase its share to 56% from 55% if Vodafone does not pay the additional money.

In October 2000, Amey Stone -- then Associate Editor of BusinessWeek Online and now of BloggingStocks -- co-wrote an article about the KREMEY (Krispy Kreme Euphoria Yardstick) which compared the fate of $5,400, invested in 10 high profile dot-com stocks, with Krispy Kreme Doughnuts, Inc. (NYSE: KKD) which went public in April 5, 2000. Since then, the 10 stocks have tumbled 44%, while Krispy Kreme is down 23%.

Krispy Kreme is losing more money, according to The Wall Street Journal [subscription required]. The company makes great-tasting doughnuts. And since I was quoted in that October 2000 article I've learned more about how the human body metabolizes doughnuts. It initially releases a rush of insulin to digest all the sugar and carbohydrates in the doughnut. Following that sugar rush, people get listless and hungry.

This metabolic trajectory mirror's that of Krispy Kreme's stock chart. But since February 2005 when there were fears the company would file for bankruptcy, the stock has had a nice recovery. Meanwhile, of the 10 dot-com stocks on that April 5, 2000 list, three no longer exist as publicly-traded stocks -- AOL, eToys, and iVillage.com -- and the remaining seven are down an average of 44% -- as detailed below.

On May 26, 2006, I blogged about the decline of what was once a solid brand -- Krispy Kreme Doughnuts (NYSE:KKD). At the time, I said it was full of holes -- closing stores, franchisees bankrupted, a government investigation starting. But I also pointed to the new CEO, Daryl Brewster, who analysts were hoping might revitalize the company. KKD was $10 a share then. Today, nearly a year later, it is still floundering at nearly the same price.

In The Business Journal earlier this month, Brewster was reported as saying, "We kind of call it going from survival mode, which we were clearly in a year ago, to stability, which we think we're approaching .... But at the same time, (we're) really building and driving toward sustained growth as we go forward."

Out of survival mode, maybe, but out of the weeds? I'm not so sure. That said, Krispy Kreme is trying -- in February, it announced a new whole wheat donut. (I'd argue that if you're buying a donut, you aren't really thinking about health foods to begin with, so this is pretty misguided product development!) It is expanding through franchises abroad and designing cheaper, smaller stores. It has recently refinanced its debt as part of an overall cost-cutting mission, and it's resolved most of its accounting and legal problems.

Wall Street analysts are not walking away yet -- many of them see ongoing hope under Brewster. I still don't see too much hope in Krispy Kreme though -- there's simply too much competition with places like Dunkin' Donuts, and what had made KKD unique was its boutique, hard-to-find feel -- which was long ago destroyed. In fact, Dunkin' Doughnuts has hired Rachel Ray, the "hip" celebrity chef, to appear in ads for Dunkin' Doughnuts and the chain is making a concerted effort to grow its appeal with a fresher look. All of this will make it harder for Krispy Kreme to make a comeback.

MOST NOTEWORTHY: Bristol Myers Squibb Co (BMY), Krispy Kreme Doughnuts Inc (KKD), Martha Stewart Living Omnimedia Inc (MSO) and New Century Financial Corp (NEW) were some of today's more notable upgrades:

• UBS upgraded shares of Bristol Myers Squibb Co (NYSE: BMY) to Buy from Neutral. The firm finds the recent pullback an attractive buying opportunity given the possibility of a takeover approach. The broker also believes BMY will likely win its Plavix patent case.

• CIBC resumed coverage of Krispy Kreme Doughnuts Inc (NYSE: KKD) with a Sector Performer rating, up from its recent Underperformer rating, citing resolutions to numerous accounting and legal issues for the upgrade.

• Morgan Stanley upgraded Martha Stewart Living Omnimedia Inc (NYSE: MSO) to Equal Weight from Underweight.

• Bear Stearns upgraded New Century Financial Corp (NYSE: NEW) to Peer Perform from Underperform saying downside risk is limited to $10-$11, but sees upside if business stabilizes and liquidity improves...

OTHER UPGRADES:

• JP Morgan raised Eaton Vance Corp (NYSE: EV) to Neutral from Underweight to reflect the company's strong fund sales and continued capital returns to shareholders.

• AG Edwards replaced Exxon Mobil Corp (NYSE: XOM) on its Focus Portfolio, adding Chevron Corp (CVX) to reflect the company's improved financial strength and attractive valuation.

• Lehman Brothers upgraded Apple Inc (NASDAQ: AAPL) to Overweight from Equal-Weight with a $105 target based on the recent pullback in shares.

• Friedman Billings raised Hess Corp's (NYSE: HES) rating to Outperform from Market Perform, based on growth reserves and an improving outlook.

• Merrill Lynch upgraded Logitech International SA (NASDAQ: LOGI) to Buy from Neutral.

• Matrix upgraded Abbott Laboratories (NYSE: ABT) to Buy from Hold on valuation.

Analyst summaries provided by TheFlyOnTheWall.com (subscription required).

Still plagued by health and obesity concerns, Krispy Kreme Doughnuts, Inc. (NYSE:KKD) introduced a new, healthy donut yesterday. This is a whole wheat donut with a sweet caramel flavoring covered in the original Krispy Kreme glaze.

This donut is hitting headlines because it is only 180 calories -- a great reduction from the company's "original recipe" donuts. Despite the calorie reduction, Krispy Kreme's Senior Vice President of Marketing said the donut "delivers the delicious taste that our customers have come to expect from us." The donut will be available starting February 26, 2007, at participating locations.

This product could potentially begin bringing back consumers the company has lost during the original health and low-carb scares and accelerate the company's coffee and drink businesses. Still, I wouldn't touch the stock (KKD) with a ten-foot-pole, whole wheat donuts or no, due to the ridiculous uncertainty surrounding the company and the premium valuation (on a P/S basis) to the Dunkin Donuts buyout price.

Poor Krispy Kreme Doughnuts (NYSE:KKD), battered by stock analysts for its poor performance, by the health community for nutrition, and by Atkins devotees for its carboliciousness.

The company has begun to respond, though. In the past month, it has announced plans to remove trans-fat from the cooking process. (Will January of 2007 forever be remembered as the month trans-fat died?) Now it is about to unveil a whole wheat doughnut.

While a regular Krispy Kreme ring has about 200 calories, the whole wheat version will trim this to 180. By my calculations, this means that I can now eat 11 and still consume fewer calories than my normal breakfast of 10.

Looking at the aging U.S. population, I wonder if KK might not drive even more sales to the health conscious by adding Metamucil or Ducolax for some needed fiber?

KK is also pushing a Valentine's Day program for schools that still haven't noticed their students don't fit in their desks any more. Share the Love with Krispy Kreme will offer Valentine's Day cards good for a free ringer with the purchase of a dozen. Better yet, locations will be frying up special heart-shaped doughnuts, iced and sprinkle coated, that KK suggests would be perfect for your kid to take to school for the VD party!

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