NORTH CAROLINA Krispy Kreme: Low-carb craze caused loss

New test products include a chocolate-covered glaze doughnut.
CHARLOTTE, N.C. (AP) -- Krispy Kreme Doughnuts Inc. reported its first quarterly loss since going public in 2000, blaming the low-carb diet craze for the slump.
Chief executive officer Scott Livengood remained adamant that carb-counting snackers, rather than rapid expansion, was the culprit.
"In 30 years in this business, I've never ever seen anything that rivals what has occurred over the last three months," he told analysts, dismissing claims Krispy Kreme was using the diet theory to cover its mistakes.
The Winston-Salem-based company said Tuesday it lost $24.4 million, or 38 cents per share, in its first quarter after taking a charge for shutting down its Montana Mills Bread Co. chain and other restructuring costs.
The company took an asset impairment charge of 7 cents per share for seven stores that had closed or were scheduled to close. It also reported a loss from discontinued operations of about $34.3 million, or 54 cents per share, for the planned sale of Montana Mills.
Scaling back
Krispy Kreme, which has seen its share price plummet 37 percent since warning May 7 that the surging popularity of low-carb diets had hurt its sales, also scaled back its expansion plans for the year. It estimates opening about 100 new stores systemwide, about 20 less than previously planned.
Krispy Kreme earned $13.1 million, or 22 cents a share, in the same quarter last year.
Excluding the one-time charges, earnings were 23 cents a share, which matched the average analyst estimate compiled by research firm Thomson First Call.
Total sales rose 24 percent to $184.4 million and sales at stores open at least a year increased 4 percent. Sales at company-owned stores rose 5.2 percent.
Shares of Krispy Kreme rose 3 cents Tuesday to close at $19.88 on the New York Stock Exchange.
Company officials pointed to the new competition from low-carb products, particularly in supermarket aisles, where dozens of items are advertised as being low in carbohydrates.
"People will try something new," said chief operating officer John Tate. "If it tastes good, they will buy it again. If it doesn't, they will go back to what they were eating before."
New products
During the call, the executives said Krispy Kreme is planning to market several new products, including a sugar-free doughnut and a new line of frozen drinks. The company also is testing a chocolate-flavored glazed doughnut, doughnut holes and minidoughnut rings.
In a note to clients Tuesday, analyst Glenn Guard of Legg Mason Wood Walker said he remains bullish on Krispy Kreme.
"While we expect more bad news from Krispy Kreme this year, we believe the market has already factored this into the share price," he wrote. "People are not going to stop eating doughnuts and Krispy Kreme continues to take market share away from competitors."