Cart (0)
business newsKrispy Kreme Is Rolling in Dough
By
Justin Sharon
Nov 29, 2010 4:15 pm
Shares are surging almost 7% to touch a fresh 52-week peak in advance of its third-quarter earnings due on December 1 after the close.
PRINT
 |
|
The company was founded in 1937 -- clearly periods of economic uncertainty are boom times for comfort foods -- and its old-time glazed sweet treats come in 20 different varieties and can be washed down with an assortment of java and juices. After a period of breakneck growth during the 1990s, including the establishment of its first New York outpost, Krispy Kreme crashed and burned in a hurry during a time when the only thing it appeared to be cooking was its books. The accounting scandal, which forced out CEO Scott Livengood in 2005, took a big bite out of its share price, as did overly aggressive expansion into off-site areas including supermarkets and gas stations which lacked the homely ambiance of their approximately 83 company-owned stores, and the ruinous effects of Atkins and his carb-killing diet.
From an all-time high of $49.74 in 2003 the stock slumped to barely a buck last year, so investors expecting a sleepy food name now know better. The firm has done an excellent job turning around its margins but faces heavyweight competition from both Dunkin’ Donuts and Canada’s expanding Tim Hortons (THI).
Please see Krispy Kreme Hands Off Day’s Revenue in Doughnut Box, The Tragedy of Krispy Kreme, and Companies That Almost Weren't: Tim Hortons.
Anyone attempting to shed some post-Thanksgiving pounds would be well advised to shop with cash instead of plastic, especially in light of last week’s incident where a woman had her debit card charged almost three grand for a pizza. However, one maker of reloadable prepaid debit cards is doing just fine even amid today’s overall stock downdraft. October IPO NetSpend Holdings (NTSP) is up more than 2% after several equity analysts launched bullish Buy-rated coverage on the Austin, Texas outfit this morning.
Many researchers rate the company capable of delivering 30% plus earnings per share growth by focusing on providing financial services to an under-served, under-banked core customer base. (The FDIC estimates that this population numbers more than 60 million in America.) Earlier this month the 11-year-old firm reported a 78% increase in quarterly net income to $6.4 million, or $0.07 on an EPS basis, as its active card user base grew by 400,000 from year-earlier levels. It generates strong cash flow and should benefit from a secular shift to plastic.
A valuation that's above its industry peers indicates shares aren’t especially inexpensive, however.
Also check out Bank of America to End Overdraft Fees on Debit Purchases, Credit Unions Compare Favorably to Banks, and Don’t Cut It Up! Why Credit Cards Still Matter.
Long before there was Madoff, there was Madden. (Both born in Queens -- what is it about New York’s biggest borough?) The man who founded footwear firm Steven Madden (SHOO) 20 years ago spent 31 months behind bars for securities fraud and money laundering but is riding high once more. Shares in his Long Island City-based company are up almost 3% to take their 12-month gain to more than 90% thanks to the benefit from a Barron’s boost; after Martha Stewart's (MSO) impressive performance last week and Michael Vick’s recent rehabilitation, maybe there are indeed “second acts in American lives” after all.
This weekend the financial newspaper carried a glowing article on the company that operates 89 retail outlets and also sells to department stores, saying it's taking “all the right steps.” Cutting-edge products in their eight key brands, just-in-time inventory management, and a strong balance sheet with $153 million in net cash were among the favorable factors cited by the publication. Steven Madden’s estimated Price/Earnings ratio of 17.2 times for 2010 is also below that of retail rivals including Kenneth Cole (KCP) and Crocs (CROX), which sport multiples of 24.6 times and 23.9 times, respectively.
A decline in third-quarter gross margin to 42.1% from 44% indicates not everything is rosy, but for now the firm seems to be walking on water in the estimation of many investors.
Turn to Crocs Stock Getting Its Legs Back? and Crazy Business Ideas That Actually Worked: Zappos for related content.
The original Piano Man is increasingly arthritic and it’s not an auspicious afternoon for his favorite instrument, either. This afternoon Barron’s also is exerting an oversize impact on shares of Steinway Musical Instruments (LVB), although in the opposite direction. (The periodical is having a far better day than the market -- even a Hold-from-Buy downgrade of Ameriprise (AMP) at Citigroup failed to prevent that stock gaining after it wrote favorably of the asset manager.)
For Steinway, its symbol a touching tribute to Ludwig van Beethoven, investors are today turning a deaf ear to the firm best known for pianos but which also produces everything from flutes to French horns. Although its grand piano sales picked up 11% in its third quarter, the Dow Jones weekly believes shares are “too high” after outperforming the overall market this year, especially in light of the “significant hurdles” it faces. These include slumping European sales for its expensive products items in a still torpid economy. While it is now headquartered in Massachusetts, Steinway is of course, much like Steve Madden, most closely associated with Queens. Indeed its iconic factory hails from the same Astoria streets that produced another musical icon. There’s no need for Tony Bennett to start singing the blues for Steinway just yet, but shares do look set for a spell on the sidelines.
Super Mario Sheet Music for Nerdy Pianists has more.
No positions in stocks mentioned.
The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.
Copyright 2011 Minyanville Media, Inc. All Rights Reserved.
Copyright 2011 Minyanville Media, Inc. All Rights Reserved.
