Krispy Kreme Profit Rises on Higher Sales

WINSTON-SALEM, N.C. (AP) —

Start with a modest increase in sales, add a helping of interest income and a dollop of lower interest expense, and you’ve got Krispy Kreme’s recipe for a 34 percent increase in third-quarter profit.

CEO James Morgan said in a statement that the company is growing sales despite a “tepid” consumer spending environment. Still, revenue wasn’t as sweet as expected, and the doughnut chain left investors with a sour taste by predicting disappointing earnings for the coming year.

The shares fell 83 cents, or 3.3 percent, to close at $24.55, then tumbled another $3.33, or 14 percent, to $21.22 in after-hours trading.

Krispy Kreme Doughnuts Inc. said Monday that it earned $6.8 million, or 9 cents per share, in the quarter ended Nov. 3. That compared with year-ago profit of about $5 million, or 7 cents per share. The company said that excluding a provision for deferred income taxes, it would have earned 16 cents per share.

Revenue rose 7 percent, to $114.2 million from $107.1 million. Sales at company-owned stores open at least a year increased 3.7 percent, thanks to price increases.

Interest income rose to $341,000 from $14,000, and interest expense declined to $131,000 from $384,000.

The company raised the lower end of its profit forecast by a penny per share, to a range of 60 cents to 63 cents per share, for the year ending in February.

But Krispy Kreme said earnings excluding special items will range between 71 cents and 76 cents per share for the year ending in February 2015, below the 77 cents per share that analysts were expecting.

Krispy Kreme plans to open 10 to 15 company stores, 20 to 25 U.S. franchise locations, and about 85 international franchise stores in the next fiscal year. It expects sales in stores open at least a year in international franchise locations to fall after the big expansion of recent years.

Krispy Kreme has more than 240 stores, including about 150 franchise locations, in the United States. It has more than 560 franchise locations in 22 other countries.

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