Krispy Kreme Shares Drop After Doughnut Chain Trims Forecast

Jun 03, 2014 4:10 pm ET

(Updates with closing share price in second paragraph.)

June 3 (Bloomberg) -- Krispy Kreme Doughnuts Inc., the chain known for hot glazed doughnuts, tumbled the most in six months after cutting its earnings forecast, citing sluggish first-quarter sales and mounting costs.

The shares fell 15 percent to $16.19 at the close in New York for the biggest drop since Dec. 3.

Earnings this year will be 69 cents to 74 cents a share, compared with a previous estimate of as much as 79 cents, the company said yesterday in a statement. The move follows a first- quarter sales gain of less than 1 percent to $121.6 million. That missed the $125.8 million predicted by analysts on average, according to data compiled by Bloomberg.

“Severe winter weather adversely affected both on-premises and wholesale sales throughout our company store base in the Southeast, and contributed to a 1.5 percent decline in same- store sales,” Executive Chairman James Morgan said in the statement.

The slow start to the year will weigh on Krispy Kreme’s annual forecast, the Winston-Salem, North Carolina-based company said. It’s also grappling with higher-than-expected expenses for its new enterprise resource planning system -- software that helps businesses track and analyze data -- and a costly management succession. Tony Thompson was named Krispy Kreme’s chief executive officer last month and took the job this week.

Krispy Kreme hired Thompson from Papa John’s International Inc., where he served as the pizza chain’s chief operating officer. He replaced Morgan, 66, who will keep the chairman role. Morgan had been the doughnut company’s CEO since 2008.