Krispy Kreme plans to restate earnings for the last three quarters of fiscal 2004
Tuesday, January 4th 2005, 10:40 am
By: News On 6
RALEIGH, N.C. (AP) _ Troubled doughnut maker Krispy Kreme will restate earnings for the last three quarters of fiscal 2004 in the wake of allegations the company padded shipments to hide declining sales. Its shares sank nearly 10 percent.
The company filed documents announcing its decision Tuesday with the federal Securities and Exchange Commission.
In a news release, the company said its board of directors had concluded that statements for the fiscal year that ended last Feb. 1 should be revised.
The restatements are expected to reduce the company's profits for 2004 by between $3.8 million and $4.9 million, or 6.6 percent to 8.6 percent. Earnings per share for fiscal 2004 would drop by 7 or 8 cents.
Shares of Winston-Salem-based Krispy Kreme Doughnuts Inc. were down $1.17, or 9.5 percent, to $11.11 in midmorning trading on the New York Stock Exchange. The stock in the once-trendy doughnut maker had already dropped 66 percent in 2004.
A recent filing in a shareholder lawsuit alleges the company routinely padded sales by doubling doughnut shipments to wholesale customers at the end of fiscal quarters. It is part of a consolidated group of suits that claim executives knew sales were slowing by at least January 2003 but hid that fact until May, when Krispy Kreme reported its first-ever quarterly loss, sending stock into a tailspin.
Krispy Kreme has blamed its problems on popularity of low-carbohydrate diets and high oil prices. But critics have argued that the company expanded too quickly and saturated its market by making its product available in grocery stores and convenience stores.