Krispy Kreme Cites Low-carb Diets in Profit Warning

WINSTON-SALEM, N.C. - Krispy Kreme Doughnuts Inc. today cut its earnings forecast by 10 percent in its first profit warning since going public four years ago, citing the popularity of low-carbohydrate diets as a negative factor.

Krispy Kreme, whose shares slid nearly 20 percent in trading before the market opened today, said in the face of that trend it would shut down or sell off operations of Montana Mills Bread Co., a gourmet bread and pastry chain it bought last year for about $40 million. It also will curtail spending outside its main Krispy Kreme operations.

Krispy Kreme said U.S. doughnut sales volume fell 0.4 percent industrywide in the 12 weeks ended April 18 from a year earlier. In the previous 12 weeks it had risen 7.4 percent from the year before.

"For several months, there has been increasing consumer interest in low-carbohydrate diets, which has adversely impacted several flour-based food categories, including bread, cereal and pasta," Krispy Kreme chairman, president and c.e.o. Scott Livengood said in a statement.

"This trend had little discernible effect on our business last year," Livengood said. "However, recent market data suggests consumer interest in reduced carbohydrate consumption has heightened significantly following the beginning of the year and has accelerated in the last two to three months."

The Winston-Salem, N.C.-based chain now estimates that first-quarter earnings from continuing operations, excluding asset impairment charges associated with Montana Mills, will be about 23 cents per share. Including charges, it expects earnings of 16 cents per share.