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Non-Tech : Krispy Kreme Doughnuts, Inc. (KKD) -- Ignore unavailable to you. Want to Upgrade?

To: Jon Khymn who wrote (845)	3/7/2003 12:24:36 AM
From: Jon Koplik	Respond to of 1001

I still love eating KKD donuts; and writing (small amounts of) naked put options on KKD. Jon.

To: Jon Khymn who wrote (845)	3/16/2003 4:03:27 PM
From: Jon Koplik	Respond to of 1001

Reuters -- money manager Ron Baron / Krispy Kreme Doughnuts March 16, 2003 Baron Kicks the Tires, Eats the Doughnuts By REUTERS Filed at 12:58 p.m. ET NEW YORK (Reuters) - Stock picker Ron Baron analyzes financial spreadsheets and other data when researching stocks. But he also ponders intangibles such as: ``What makes the perfect jelly doughnut?'' The New York fund manager, who recently spent a day at the North Carolina headquarters of Krispy Kreme Doughnuts Inc. (KKD.N) learning about baking techniques, wants to understand everything about the companies he holds in his portfolios. ``I love talking to companies and trying to understand them, and ripping them apart and putting them together and seeing how they work,'' Baron said in an interview at his spacious offices on Fifth Avenue in Manhattan, overlooking Central Park. ``We're investors in businesses, not so much in the stock market,'' he said. Baron is the founder of Baron Capital Group, a small and mid-cap focused asset manager that runs four stock mutual funds including two managed by Baron himself. His funds lagged many of their peers during the bull market of the late 1990s, but he has outperformed in recent years because he had little exposure to high-risk Internet and technology companies, which tumbled when the tech bubble burst. Instead, Baron has focused on fast-growing education, health care and niche retail stocks. The flagship Baron Asset Fund (BARAX.O) has lost money in the bear market, but the $2 billion fund still ranks in the top 16 percent of mid-cap growth funds over the last three years, according to research firm Morningstar Inc. The $1.25 billion Baron Growth fund (BGRFX.O) has done even better on a relative basis, ranking in the top 5 percent of its small growth peers during that same period. UNDER THE HOOD While many fund managers get out and ``kick the tires'' of companies, Baron goes further than most of his rivals in quizzing management and learning about their business in-depth, said Christopher Traulsen, a Morningstar analyst. ``There are relatively few growth managers who spend quite as much time getting to know companies and management as Ron Baron does,'' he said. Baron said his on-site meetings with Krispy Kreme executives, for example, helped him better understand the company's expertise in perfecting its product -- a process he thinks gives the doughnut maker an edge. ``There's a great expertise in making doughnuts,'' Baron said. ``They are able to automate processes that used to be labor intensive.'' Baron holds Krispy Kreme stock in both funds he manages. His other favorite stocks include data collection service ChoicePoint Inc. (CPS.N) and adult education provider Apollo Group Inc.Unlike many growth fund managers who trade frenetically, Baron typically hangs onto a stock for years. But some critics have said Baron sometimes falls in love with stocks, making him slow to sell them when they're no longer good investments. Baron, who socializes with some of the heads of companies he invests in, acknowledges that in some cases he has let position sizes grow too large in his portfolio. But he said he never lets friendship with a CEO color how he views a stock. ``I like people and I invest in companies that are run by people who we like and admire and trust,'' he said. ``I don't think if you talk to any executives of companies in which we are shareholders that they feel we treat them in any way with deference.'' The Baron Asset fund once had about 15 percent of its assets in brokerage Charles Schwab Corp. (SCH.N) While Baron sold about two-thirds of his shares when the stock still traded above $30 a share -- it is now down to just over $7 per share as the stock market slump has cut into its trading business -- Baron says he wished he'd acted sooner. Still, he said, the stock trades far above the price he paid for it. Baron has lost money on auction house Sotheby's Holdings Inc. (BID.N), which once made up more than 10 percent of the Baron Asset fund and now accounts for about 5 percent. The company has faced a price-fixing scandal and has called off attempts to sell itself. Baron says he has reduced risk by no longer allowing any one stock to make up more than 10 percent of a portfolio, in most cases. THE CROWD CHEERS His fans say he has a strong long-term record and does not make many mistakes. ``He is excellent, one of the best long-term managers out there,'' said certified financial planner Michael Kresh, of MD Kresh Financial Services Inc. in Hauppauge, New York. ``He's been right so many more times than wrong.'' Baron, who grew up in Asbury Park, New Jersey, is married and has two grown children. He got his start investing when he was a high school freshman, using $1,000 in gift money from his bar mitzvah to buy a local bank stock. Baron draws praise from investors for his detailed quarterly shareholder letters and his annual, day-long meeting for shareholders featuring presentations from CEOs and a surprise entertainer. Last year it was Stevie Wonder. He is upbeat about the long-term outlook for the stocks in his portfolio, saying he's been able to scoop up stocks at attractive prices at a time when interest rates are low. ``I think the surprise that's going to happen in the next four or five years is that businesses will continue to grow,'' he said. ``People will be sitting around looking at themselves and saying 'My God, how could I have not seen that coming?''' Copyright 2003 The New York Times Company.

To: Jon Khymn who wrote (845)	5/12/2003 9:16:44 PM
From: Jon Koplik	Respond to of 1001

WSJ -- Krispy Kreme: Research Backs Revival Of Satellite Shops. May 12, 2003 Krispy Kreme: Research Backs Revival Of Satellite Shops By MARY ELLEN LLOYD Of DOW JONES NEWSWIRES CHARLOTTE -- I don't care if it's not a hot one; just get me a Krispy Kreme. That's the thrust of recent consumer research that has led Krispy Kreme Doughnuts Inc. (KKD) to resume opening small shops that sell fresh - but room temperature - doughnuts. Krispy Kreme halted the opening of such shops nearly three years ago amid concerns customers would be confused or disappointed when they didn't find the chain's signature hot glazed doughnuts. But now the Winston-Salem, N.C., company is experimenting with a new generation of the shops, called satellite stores, Chief Operating Officer John Tate said in an interview Monday. In the late 1990s, Krispy Kreme opened about 10 such stores, in places such as New York City's Penn Station and Charlotte-Douglas International Airport in Charlotte. But company Chief Executive Scott Livengood halted the openings in mid-2000. At the time, the chain was developing equipment that allowed it to produce hot doughnuts in smaller spaces, so Livengood considered opening only stores that sold products made on site. Customer research over the last 12 to 18 months has led Krispy Kreme to believe there's room for both types of small-format stores, Tate said. "I hear people say all the time, 'I would eat a lot more if I could get them,' " he said. "One of the things customers are saying is they want access to hot doughnuts once in awhile ... but they also tell us they really want us to be accessible." Krispy Kreme currently produces doughnuts at about 280 facilities, most of which combine a retail storefront and a bakery. Twice a day, customers can buy doughnuts hot off the production line. The store also makes the brand's products sold in grocery stores, convenience stores and other third-party outlets. Tate said the company continues to believe North America can support around 750 of those so-called factory stores. The chain also has three of the smaller stores, dubbed "doughnut and coffee shops," where partially cooked doughnuts are finished and sold hot. Those shops are typically a couple of thousand square feet. The new-generation satellite stores will range from 200 square feet to 1,000 square feet and will sell doughnuts delivered once or twice daily from a factory store, Tate said. The shops will also sell the chain's full line of hot and cold drinks as well as Krispy Kreme T-shirts, mugs and other paraphernalia. Krispy Kreme expects to open 10 of the smaller stores - a combination of satellite and doughnut/coffee shops - this year. Beyond that, Tate said, the company hasn't decided how many it will open. But it's clearly a lot. "Is that 1,000 or 2,000? We don't know yet," Tate said. Krispy Kreme's long-range goal is for per-capita sales of around $20, compared with about $2.50 today. Having up to 2,000 smaller stores, 750 factory stores, and a growing business with grocers and other third-party retailers could help Krispy Kreme reach that goal in the next 10 years or so, Tate said. A chronic concern among Wall Street analysts is that the quantity and the quality of Krispy Kreme products sold outside its factory stores will eventually weaken the brand. Tate said the company recognizes its products must be presented well, so it monitors each of its 10,000 total points of distribution and terminated contracts at 500 outlets last year. "But the research is so clear," he said. "None of our customers feel that it demeans the brand to be able to have the convenience to purchase it in a convenience store or a grocery store." And Krispy Kreme has "pretty consistently" found that new distribution outlets don't cannibalize sales from existing outlets - even when a factory store in on one corner, a convenience store selling Krispy Kremes is on another, and a grocery store customer is nearby, Tate said. Tate said he doesn't expect sales from the smaller stores to drag down comparable-store sales at factory stores. Krispy Kreme has said it expects systemwide comparable-store sales to rise 10% this year, with growth rates possibly varying from quarter to quarter. Krispy Kreme reports first-quarter results May 28. Corporate Web site: krispykreme.com -By Mary Ellen Lloyd, Dow Jones Newswires; 704-371-4033; maryellen.lloyd@dowjones.com Updated May 12, 2003 3:35 p.m. Copyright © 2003 Dow Jones & Company, Inc. All Rights Reserved.

To: Jon Khymn who wrote (845)	5/27/2003 7:01:31 PM
From: Jon Koplik	Read Replies (1) \| Respond to of 1001

WSJ -- SMARTMONEY.COM: A Talk With Krispy Kreme CEO Livengood. May 27, 2003 SMARTMONEY.COM: A Talk With Krispy Kreme CEO Livengood By SCOTT PATTERSON Of SMARTMONEY.COM LEGEND HAS IT that the Pilgrims brought doughnuts to America. Discovered in Holland, where they were called "dough knots" (this was before the ubiquitous center hole), the tasty treats fried in boiling oil were likely a staple dish at the first Thanksgiving. Which is a little ironic since, on Nov. 2, 2000, a few weeks before the first Thanksgiving of the new millennium, Krispy Kreme Doughnuts (KKD) hit its all-time high share price of $108.50, unadjusted for stock splits. Since then, the company, which has a market cap of about $1.8 billion, has had two 2-for-1 stock splits, and shares have leveled out in the mid-$30s. On Wednesday, Krispy Kreme will announce results for its first quarter ended April 3. The Reuters Research consensus estimate is for net income of 20 cents a share, up from 15 cents a year ago. The company's shockingly strong performance since its April 2000 initial public offering has prompted shareholders to give thanks, too. Krispy Kreme President and Chief Executive Scott Livengood, who joined the Winston Salem, N.C., company in 1977 as a human-resources employee, has transformed the once small-scale Southeastern wholesaler into a national - and soon-to-be global - giant. Krispy Kreme operates 278 stores in the U.S. and Canada, and plans to open franchises in Mexico, Australia and Europe. The big question about Krispy Kreme, however, is whether it deserves its yeasty valuation. The stock certainly has its share of naysayers - who from time to time have had to wash down the company's stellar earnings results with large orders of crow. One number skeptics point to is the doughnuteer's forward-price/earnings ratio. Krispy Kreme trades at 35 times Reuters Research's 2003 earnings consensus of 88 cents, compared with just 18 for the Standard & Poor's 500. But its 2003 P/E matches that of specialty retailer Starbucks (SBUX), which is often compared to Krispy Kreme. And analysts expect Krispy Kreme to increase earnings at 32.5% annually over the next five years, compared with 21% for Starbucks. That gives it a price/earnings-growth, or PEG, ratio (P/E over earnings-growth rate) of 1.08, far cheaper than Starbucks' 1.67 or the S&P 500's 1.47. A clear-cut case of overvaluation this is not. SmartMoney.com asked the company's master chef, Livengood, how he has transformed Krispy Kreme from its modest wholesaler origins, what he plans to do to keep it growing and whether he has plans to introduce a line of fat-free doughnuts anytime soon. SmartMoney.com: What was Krispy Kreme like back in 1977, and how has it changed? Scott Livengood: It was very, very different. Krispy Kreme from the first day was about wholesale. It's always been in response to the customer's interest that we've sold doughnuts on the premises. Back in the 1930s, people sought out the store, and the owner had to cut out a hole in the production room and start selling doughnuts right there. In the 1980s and '90s, the hole had grown to a small glass box on the front of the factory. It was an environment focused on cost control, manufacturing efficiencies and the generation of volume through off-premises sales. The environment today is part of a revision of the company's strategy. Now, the in-store experience is the defining element of Krispy Kreme. This was a wholesale business that created retail opportunities. We turned that upside-down, with retail coming first and wholesale emanating from that. SM: With the U.S. economy in the doldrums, how has Krispy Kreme continued to grow and consistently beat earnings forecasts? SL: I think the change in the business model created the platform for growth. We couldn't have grown with the previous business model. Our stores were marginally profitable. So the repositioning created a platform to grow because it was focused on the store. In terms of our growth in a difficult economic environment, what's worked to our advantage is that Krispy Kreme doesn't have a well-defined demographic market. Our customers are the mirror of a community - we draw from the entire community. And our product is very affordable. I also think our doughnuts are comforting, both because of the type of product that it is and the fact that we've been around for decades. SM: What are your expansion plans for the next few years? SL: We started early on to develop relationships that would lead to strong franchise partnerships. We didn't just pick an area and say we're going to go in and deeply penetrate this part of the market. A lot of companies do that when they want to generate the kind of presence that makes media advertising more affordable. We've been fortunate in that we haven't needed to spend media dollars to build our brand. In fact I think in a lot of ways that would work against us. So we have virtually zero ad spend. And we've recently announced that we're opening stores in Mexico, we're opening our first store in Australia in June, and I think there's a good chance we'll open our first store in London later this year. SM: Krispy Kreme added premium coffee to its product line in 2001 with the purchase of Digital Java. What was the motivation for that move, and how is that going? SL: We've made coffee for decades, but we wanted to control the process. Our central strategic imperative for everything we do is centered on elevating the customer experience. That's what's repositioned and redefined our prospects as a company. It's not a lot of new things, [but rather] doing old things in new ways and doing them better. As a direct result of the new coffee line, our sales are up well over 30%. That rise was simultaneous with the rollout and promotion of that last year. SM: Krispy Kreme has often been compared with the highflying tech stocks of the bubble. How do you see that comparison? SL: They were pretty low-flying when we went public. The worst day in Nasdaq history was the day before we went public [on April 5, 2000], if you can believe that. It was a scary 24 hours. The bottom had fallen out. We didn't know if the mood was so bad that no one would want to buy any stocks. But I think it actually worked to our advantage to be something that is, at least at the store level, fairly low tech. It was a story that everybody understood. We had earnings, and we had defined prospects. I think it played to everything that the tech stocks that struggled didn't have. SM: Were you surprised by how high the company's stock has soared? SL: To be honest, I could never say that I predicted that we'd have the reception that we did, so quickly. I did expect things to go very well. I was optimistic, because I've been going to our store openings for years now, and when you go to one of those openings and see people camping out with lines wrapped around the building and cars spilling out to exit ramps on freeways - mile-plus-long lines at the drive-thru - you know you're connecting with people in meaningful ways. So I felt, in terms of the Peter Lynch school of investing, that there would be a lot of folks who knew about Krispy Kreme. We also had substantial institutional interest. Everyone that we called on bought stock in the offering. And I think that would have happened regardless. It's the power of branding and the prospects of the company. How many 65-year-old companies that have their artifacts in the Smithsonian are in the early infancy of their growth? SM: Krispy Kreme shares have a forward P/E of about 35 - quite high for the restaurant industry. Do you think that valuation is sustainable? SL: That's about half of where it was a year ago. But I really don't comment on the stock price. As much as I'd like to control it, I can't. If I could make predictions with accuracy, I would. The thing I'm sure of is that the markets like consistency and predictability. They like to be told the truth and to trust the management teams that run the companies. Those are things that I can control. I feel like we've been effective and successful at demonstrating that we're worthy of that kind of confidence. Beyond that, we let the market do its job. SM: Are you worried about lawsuits like the recent McDonald's (MCD) class-action suits for customer obesity? SL: I see what's going on, and I hear about the trial-lawyer focus on the industry. I don't obsess or worry about it. At the end of the day, I think that wisdom and level heads prevail. I trust our justice system. We don't masquerade as a health food. We're not doing advertising campaigns touting the health benefits of the product. SM: No plans for a low-fat doughnut line? SL: I think that's a contradiction in terms. Updated May 27, 2003 6:48 p.m. Copyright © 2003 Dow Jones & Company, Inc. All Rights Reserved.