Krispy Kreme Not Scaling Back Expansion: CEO Morgan

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Aug. 30 (Bloomberg) -- Krispy Kreme CEO James Morgan discusses the company's second-quarter performance, health-care costs and expansion plans. He speaks with Carol Massar on Bloomberg Television's "Taking Stock." (Source: Bloomberg)

The chain reporting profits that trailed analyst estimates.

We're joined by the company ceo.

Good to have you with us on "taking stock." you have got to be concerned when your share price falls as much as it did today.

What are you telling investors?

It is interesting.

I came from the financial services industry to krispy kreme.

The market never ceases to amaze me.

What i tell them is simply we believe internally it was one of the most positive quarters we've had since i joined krispy kreme.

I think the earnings estimates got a head.

We had a bit of noise in our quarter that cost us about 3 cents on comparison year to year.

We were near a multi-year high in a soft market.

I have learned to accept those.

I do not pay much attention to the daily movement in our stock.

We're focused on building a long -- a great company long term.

You got to pay attention to the things being said on the street today.

They highlighted what they said are not so great things to keep an eye on.

The agricultural derivative losses are one risk factor they pointed out.

They said rising health care expenses, something you talked about on the call.

Also increasing legal costs and the larger than expected drop in international same-store sales.

That is.

When it comes to risk factors.

On the first one, commodities and derivatives.

We purchased those to keep a level price for us and our franchisees'. the good news is as we extend them out, we are extending them at lower prices.

Down the road, there is good news in that.

Rsing gna, we always keep an eye on that.

We believe both items are one- offs that a quarterly basis.

We will watch that closely to keep it under control.

What about health care costs?

We are basically self- insured.

We had a higher incidence in the quarter and we have had in the past.

One or two particular ones were higher.

We have had that several times since i have been there.

We have to make sure that is not a trend and was just a blip.

Right now, we're comfortable it was not a trend.

You are on a big expansion plan.

You are looking for 900 more international stores.

Are you slowing in international expansion?

That is one of the areas analysts seem to be concerned about.

We are not.

On september 12, we will be opening in moscow with a well- known franchisee.

He has signed a 40-store development agreement.

In october, we will be opening in singapore.

We are now underway in north and south india.

I think you will be hearing about latin america in the not too distant future.

I am assuming you are hiring plans have not changed.

You will not scale back based on the results in reaction by investors today?

Absolutely not.

The july quarter is the softest quarter of the year for us historically.

That was the best july quarter we have had in 10 years.

Internally, we have a different feeling about a quarter than the markets did.

We are positive about the future and continuing to hire.

You know this is a tough business and can be competitive.

Dunkin and starbucks and best brands are expanding.

What do you do to compete with them?

Do you offer breakfast sandwiches or move into other areas?

That is a great question.

We talk about it internally.

We believe having done this and beverages is what differentiates us.

We do not have an interest to compete on that level with those.

We admire them and think they have wonderful models.

We believe we have an opportunity on just donuts and beverages to keep us as busy and successful as we would want to be.

Based on investor reaction, you are not going to change strategy?

I think it was a reaction to the stock being near a recent high.

Anytime you come below street

This text has been automatically generated. It may not be 100% accurate.


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