Mmmm…Earnings Restatement

Last year, Krispy Kreme Doughnuts blamed a sales shortfall on the popularity of the Adkins Diet. That may be partially true, but it covers over another problem. That being, the stock is Krap.

Krispy was simply getting kreamed and it started playing fast and loose with the books to try and catch up. Krispy was trying to “manage” its earnings. It wanted to tell Wall Street what Wall Street wanted to hear. The accounting soon grew out of hand, and the company could never match the image they wanted to project.

So, they lied.

Today, Krispy Kreme said that it’s going to restate earnings for the last four years. The company overstated profits by about $22 million. A committee reporting to the board of directors found that the “number, nature and timing of the accounting errors strongly suggest that they resulted from an intent to manage earnings.” The committee pinned the blame on former Chairman Scott Livengood, and former COO John Tate.

The company has hired Stephen Cooper as the new CEO. He’s made some dramatic moves so far, like firing one-quarter of the work force. He even sold the company jet. (Krispy Kreme had a jet?)

Posted by on August 10th, 2005 at 4:14 pm


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