A Krispy Kreme (NYSE:KKD) doughnut may be soft and fluffy on the inside, but the same thing can't be said for the inside of the company itself. Yesterday it was Chief Operating Officer John Tate announcing that he would be leaving the sweet-treat specialist.
It's been a hard year for Krispy Kreme. From lower sales pegged to the low-carb dieting phenomenon to questions arising from the company's franchised store acquiring practices when interested parties are involved, one is left wondering whether those are really glazed doughnuts rolling off the line or just a sea of zeroes.
According to Reuters, Tate will be assuming the same position at Restoration Hardware (NASDAQ:RSTO). A cynic can argue that it may be a lateral move because both companies are selling finished goods, but it's not as though Tate is taking the easy way out here. Restoration Hardware is another company that is trading for just a fraction of its earlier highs. Despite mounting a recent comeback, the home decor retailer still has a long way to go before it gets back on track with the high growth and consistent profitability that once lured in investors.
Hopping in to lead a troubled company can be a blessing. With expectations running bone dry, even a hiccup of improvement can kick-start the accolades. We saw that recently with Paul Pressler over at Gap (NYSE:GPS) and more impressively accomplished by the late Jim Cantalupo over at McDonald's (NYSE:MCD).
But shareholders aren't as concerned to learn who is coming in as much as trying to figure out why an insider is leaving. The fact that Tate is apparently heading to a company with its own hurdles to clear makes the matter even more pressing. Are there more skeletons in the Krispy Kreme closet?
When the stock was singled out in our own Motley Fool Stock Advisor, the company clearly had a more favorable prognosis as folks were wolfing down the company's concoctions in large amounts and earnings were following suit. Profit projections have since been lowered and good news has been sparse.
Thankfully, this was only Tate moving on. The red flags would be waving something fierce if CEO Scott Livengood were to follow Tate out the door. He isn't. He must realize that while some CEOs such as Pressler and Cantalupo inherit their turnaround situations, others simply experience the downturn from the inside and have to fight their way back.
Have the Atkins and South Beach diets piqued your interest? Are you looking to shed some extra weight but don't know how to get started? Can you give up the bad carbs? All this and more in the Low Carb Way of Life discussion board. Only on Fool.com.
Longtime Fool contributor Rick Munarriz will admit to attending a Florida Marlins game, watching the baseball team land a dozen hits, and then camping out at Krispy Kreme to collect his free dozen doughnuts. He owns shares in Krispy Kreme.
