By REUTERS

Published: August 26, 2004

Filed at 7:14 a.m. ET

NEW YORK (Reuters) - Krispy Kreme Doughnuts Inc. (KKD.N) on Thursday posted sharply lower quarterly earnings, signaled that the second half of the year would be weak and scaled back store openings as it tries to overhaul operations after being battered by popular low-carbohydrate diets.

The doughnut chain also said it was not providing earnings guidance for its current third quarter or fiscal 2005 as it hopes to focus on delivering improved long-term results. Krispy Kreme's shares fell 29 percent after it gave a profit warning back in May.

``Although we are disappointed with the second quarter financial results, we are optimistic about the long-term growth potential of the business,'' Chief Executive Scott Livengood said in a statement. ``I am confident in our ability to restore our business momentum.''

Livengood did not cite a specific reason for the second-quarter shortfall in the company's release, but in the past the company has pointed to the low-carb craze as a problem for its business.

Krispy Kreme, which in July said federal investigators were investigating its repurchase of franchises, said it earned $5.8 million, or 9 cents per share, on a reported basis in its second quarter, compared with $13 million, or 21 cents per share, a year earlier.

Six analysts on average had expected profit of 22 cents a share, with estimates ranging from 19 cents to 24 cents a share, according to Reuters Estimates.

http://www.nytimes.com/reuters/busi...reme-earns.html