Krispy Kreme is latest victim of low-carb diet?

PAUL NOWELL

Associated Press


CHARLOTTE, N.C. - Is the delectable Krispy Kreme doughnut the latest victim of the low-carb diet craze?

The Winston-Salem-based doughnut maker said Friday that lower demand for its high-calorie treats - which the company attributes in part to the low-carb diet phenomenon - was behind its decision to lower its profit guidance by 10 percent.

"The popularity of low-carb diets has captured the consumer's attention," said Scott Livengood, chief executive and chairman. "It's impossible to predict if low-carb is a passing fad or will have a lasting impact.

"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," he said.

Until recently, Livengood said, the consumer change had "little discernible effect on our business." However, he said, recent market data suggests consumer interest in reduced carbohydrate consumption has heightened.

"This phenomenon has affected us most heavily in our off-premises sales channels, in particular sales of packaged doughnuts to grocery store customers," he said.

In March, Krispy Kreme unveiled plans to offer a low-sugar doughnut.

One of Krispy Kreme's Hot Original Glazed doughnuts has 200 calories. More than half those calories come from fat, which gives the fried doughnut texture and flavor.

On Friday, Livengood said the company estimates diluted earnings per share from continuing operations will be approximately 23 cents. The company also expects fiscal 2005 diluted EPS from continuing operations to be between $1.04 and $1.06, which is approximately 10 percent lower than prior guidance, he said.

Including one-time charges, diluted earnings per share from continuing operations will be about 16 cents for the first quarter and between 93 cents and 95 cents for fiscal 2005, he said.

"Our current guidance assumes a continuation of the low-carb phenomenon that is affecting the industry," Livengood said. "Needless to say, we are disappointed that external forces have caused us to revise our first quarter and fiscal 2005 earnings guidance."

The company will divest its existing Montana Mills operation, which will result in a charge of at least $35 million in the first quarter and charges of $2 million to $4 million in subsequent quarters, Livengood said.

In addition, six company stores will be closed, he said.



http://www.fortwayne.com/mld/newsse...ess/8613315.htm

http://www.foxnews.com/story/0,2933,119273,00.html

http://quote.bloomberg.com/apps/new...efer=news_index