Krispy Kreme are the latest company looking to cash in on the still-hot stock market, filing plans for an IPO earlier this week.
Completely stuffed
We've all experienced that feeling of eating one too many doughnuts, but Krispy Kreme management didn't get that memo back in the early noughties, in the company's first stint as a public company. After its IPO in 2000, Krispy Kreme expanded aggressively, with both franchises and company-owned stores — until a big hole was found in the company's accounting.
Krispy Kreme franchisees were accusing management of overloading areas with Krispy Kreme stores. That gave the company a short term boost in revenues, but longer term it meant franchisees were competing with each other, and the growth was completely unsustainable. More seriously, some franchisees accused Krispy HQ of "channel stuffing" — claiming that twice the number of doughnuts they actually needed would turn up at their franchise in the final few weeks of a quarter, in order for the company to meet its sales targets.
Things started to really unravel in 2004, with the company's first ever quarterly loss. The CEO blamed the rise of the Atkins diet and a new trend of low-carb eating. From there things went from bad to worse. Reports of channel stuffing were combined with some unusual financing choices and lucrative buyouts for some franchisees, some of which had ties (like being the ex-wife of the CEO) to insiders at the company.
After restating its profits (down, by a lot) the Krispy Kreme share price cratered and sales stalled for a number of years. After a few solid years a private company bought the entire business and took it private in 2016. It looks like they've been busy since then, growing revenue almost 20% a year for 4 years. Krispy Kreme is ready for its second chapter as a public company.
