Doughnut holes: Rumors that Krispy Kreme (KKD: news, chart, profile) is close to lining up $225 million in financing caused its stock, which was slumping Monday morning, to manage a meager (albeit brief) turnaround.
On Friday the company said its lenders had agreed to extend, yet again, the deadline for the company to produce its long-delayed annual financial results. Just why the stock would rise on that news is anybody's guess.
Think about it this way: Why aren't the bankers, who know the company best, stepping up? And if they're not willing to lend, why should investors take a leap of faith on the stock, which comes last in line for having any claim on the company?
Any private lenders at this point are likely to be investors who specialize in taking chances on the debt secured against assets - not the stock. There's no doubt Krispy Kreme the brand has value and will survive.
But that doesn't guarantee its existing stock will, especially based on information disclosed so far. "Specifically," says money manager Eric Von der Porten of Leeward Investments, who owns puts and calls on Krispy Kreme's stock, "the November and December sales information indicates that company store sales could be approximately $51,800 per week - and on a downward slope. Analysis of the historical results suggests that breakeven should be about $51,300 per week. If this is accurate, contribution from the company stores may be near zero, down from more than $7 million per month just a year ago. With franchise stores already operating at les than $50,000 per week, the outlook for store profitability appears poor."
To quote the headline on a weekend editorial from the Los Angeles Times: "A sticky mess."
marketwatch.com
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