I haven’t checked in on beleaguered doughnut franchisor Krispy Kreme Doughnuts, Inc. in awhile, so I noticed the company’s regulatory filing a week or so ago in which the North Carolina-based company announced that it is “highly unlikely” that it would be able to deliver its financial statements to lenders by a December 15 deadline. Although a publicly-owned company, Krispy Kreme has not filed a financial statement since September 2004 and is facing a January, 2006 deadline for having its stock delisted by the New York Stock Exchange. As the company continues the process of restating earnings by over $20 million for its first four fiscal years, the company’s stock — which traded at around $50 per share in 2003 — is trading closer to $5.50 per share now.
So, can this trendy maker of delicious doughnuts stay out of tank? Probably not, but this Business Week Online article surveys the company’s landscape and sets forth CEO Stephen F. Cooper‘s turnaround strategy, which is essentially to operate smaller stores and expand into foreign markets while selling more high-margin coffee. I’ve got my doubts about whether that’s a winning strategy, at least without a formal reorganization under chapter 11, but who knows? Mr. Cooper agreed to a success fee based on 1.7 million warrants that are convertible into shares at $7.75, so he is clearly betting on the company’s success. And the company still makes a good doughnut. However, as one commentator in the article notes, “the lines are no longer out the door.”