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Krispy Kreme's 3rd-Q loss widens

WINSTON-SALEM N.C. Krispy Kreme Doughnuts Inc. said increased food and equipment costs coupled with an 8.7-percent drop in revenue led to a widened net loss for the company’s fiscal third quarter.

For the quarter ended Nov. 2, Krispy Kreme lost $5.9 million, or 9 cents per share, compared with a net loss of $798,000, or 1 cent per share, in the same quarter a year ago.

Revenue for the parent to the 509-unit doughnut chain, based here, fell to $94.3 million, from $103.4 million a year earlier, on a reduced store count and a same-store sales drop of 1.3 percent.

Operating expenses in the latest quarter rose to 92.4 percent of sales from 88 percent of sales a year ago, mostly from increased costs for equipment, doughnut mix and fuel, the company said.

During the quarter, Krispy Kreme opened 37 new stores systemwide but closed 22 units, which amounted to a net increase of 15 locations. All of the stores were opened overseas by franchisees.

Jim Morgan, Krispy Kreme’s chairman, president and chief executive, said that despite the chain’s increased losses, he is confident of a turnaround beginning in fiscal year 2010, which begins in February.

“Our third quarter performance was impacted by a challenging operating climate led by high gas prices, as well as our commitment to investing in our growth plan,” he said. “We have undertaken key strategic initiatives to strengthen our business as well as the economics of our stores and that should help us succeed through various economic cycles and deliver positive long-term results.”

The company’s strategic initiatives include the sale of its Kool Kreme soft-serve ice cream, which currently is in test at several stores around the country, the opening of smaller stores and continued overseas expansion.

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