Good day for KKD
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Higher Prices Help Krispy Kreme Profits
Wednesday May 28, 9:42 am ET
CHICAGO (Reuters) - Krispy Kreme Doughnuts Inc. (NYSE:KKD - News) said on Wednesday quarterly earnings rose nearly 50 percent as higher prices and improved coffee helped sweeten sales.
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Shares of Krispy Kreme were 8 percent higher in early trading.
The profit rise marked the 11th consecutive quarter the company, known for its hot glazed doughnuts, has beaten analysts' estimates by a penny, one analyst noted.
Krispy Kreme posted an 11.2 percent increase in sales at stores open at least a year, exceeding the results of most other restaurant chains in that key measure.
Winston-Salem, North Carolina-based Krispy Kreme has been able to raise prices at its company-owned stores, Andrew Wolf, analyst at BB&T Capital, said.
"It's the quality," Wolf said of Krispy Kreme's ability to raise prices and post much stronger sales in a weak economy. "It's always been the quality. You're not going to be able to raise your price and keep your volume on the product without the quality."
Wolf has a "buy" rating on the stock and BB&T has done investment banking for the company in the past.
For the fiscal first quarter ended May 4, the company said its profit rose to $13.1 million, or 22 cents per share, for the fiscal first quarter ended May 4, from $8.9 million, or 15 cents per share, a year earlier.
Earnings included $500,000 from having overestimated the cost of an earlier arbitration award against the company. Without that benefit, its earnings would have been $12.8 million, or 21 cents per share, the company said.
In March, Krispy Kreme had estimated earnings of 20 cents per share for the quarter, and Wall Street analysts' own estimates had uniformly mirrored the company's forecast, according to Reuters Research, a unit of Reuters Group Plc.
Based on its first-quarter performance, Krispy Kreme now expects to earn 90 cents per share for fiscal 2004, 2 cents higher than its own previous estimate of 88 cents per share. It has not changed estimates for the remaining three quarters of the year, however.
Systemwide sales, including sales of company and franchise stores, advanced 24.4 percent to $227.8 million. Aside from improved pricing, Krispy Kreme has benefited in recent quarters from the introduction of better coffee in its stores after buying a coffee roaster.
Total company revenue, which includes sales from company stores, franchise operations, and Krispy Kreme Manufacturing and Distribution, rose 33.9 percent to $148.7 million.
Six new Krispy Kreme stores were opened during the quarter, bringing the total to 282 at the quarter's end. The company affirmed its expansion plans for fiscal 2004.
Krispy Kreme expects earnings per share of 20 cents in the second quarter, 22 cents in the third, and 26 cents in the fourth.
The company is still targeting systemwide same-store sales growth of 10 percent for the year.
Shares of Krispy Kreme jumped $2.59 to $34.45 in early trading on the New York Stock Exchange (News - Websites).
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