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The New Economy

Krispy Kreme: glazed doughnuts and now sweet profits

Krispy Kreme, whose stock is up 34 percent since June, is luring back investors.

By / September 29, 2010

Krispy Kreme is luring back customers with its signature glazed doughnuts (shown here in a 2004 file photo from Charlotte, N.C.) and attracting investors with sweet (albeit slim) profits.

Nell Redmond/AP/File

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The challenge for Krispy Kreme was that everyone loved the doughnuts, but no one liked the stock.

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Now, investors' outlook is getting a little sweeter.

On Tuesday, shares of Krispy Kreme Doughnuts rose to $4.68, up 34 percent in three months. Except for a brief surge about the $5 level in April, this is the stock's highest level since 2008.

Investors are coming back because the once high-flying stock is showing signs of a slow turnaround. Earlier this month, the chain based in Winston-Salem, N.C., reported a rise in same-store sales for the seventh quarter in a row. Krispy Kreme also said it was raising its estimate of operating income for the entire fiscal year to a new range of $13 million to $17 million, up from the $11 million to $15 million it predicted in June.

The stock has attracted enough interest that in the last six months a handful of stock analysts has begun covering the stock again.

Of course, this is a far cry from the heady days soon after the company went public in 2000. Back then, customers lined up for company's freshly made glazed doughnuts and its stock price briefly climbed above $50. Shares tumbled, however, when the company overexpanded and couldn't keep growing its sales. The chain had to close stores and got into legal battles with some franchisees.

Now under new management, a much slimmed-down Krispy Kreme is beginning to open new stores again.

On Tuesday, the company announced (.pdf) it had opened its first store in Thailand.

"Our transition is an ongoing process," company CEO Jim Morgan said in a Sept. 2 release (.pdf) announcing a small quarterly profit (compared with losses a year ago). "We are confident we can build an even stronger foundation for the future by continuing to both invest in our businesses and support our domestic and international franchisees."

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