Looking to put the dough back in doughnuts, Krispy Kreme (NYSE:KKD) is cutting back on some of its fat. Don't worry, its glazed treats will be as decadent as always. Instead, the company has cut loose some of its employees and a jet lease, as it aims to trim some of its bulky overhead.
Why did Krispy Kreme need a plane in the first place? To see whether you could make out the "Hot Doughnuts Now" neon sign from 30,000 feet in the air? Was the $3 million in annual expenses on the jet necessary for the company to keep tabs on its round empire of more than 400 stores, or was it just a way to make sure the execs would arrive stylishly at the next Tyco (NYSE:TYC) toga party?
Whatever the case, dumping the plane was a good step in a leaner direction. Both moves cost Krispy Kreme $900,000, but the company will save $10.4 million a year in overhead. As long as it's able to make do with 25% less staff in some key operating areas, it will at least appease the creditors in the short term -- and perhaps the investors in the longer term.
Layoffs are never pretty. Real people will be losing real jobs. Yet Krispy Kreme in its present state is a broken company. The bad news has been relentless over the past year, from the mumbling of low-carb dieters to serious allegations of misdeeds.
So is Krispy Kreme a brand worth saving? It's already preserved at the Smithsonian, but is the entity itself worth turning around? Does it stand a chance and, if so, will patient investors be duly rewarded for taking the fiscal abuse?
Friends of Krispy Kreme -- that's the fitting name of the company's free online offering of monthly email newsletters and other corporate virtual tidbits to its electronic fan base. Enemies of Krispy Kreme -- well, that seems to be just about everybody else these days. Yet if you believe in investing when the chocolate icing is muddying up the street, why not take a closer look at this company?
There's been a change at the top. You're already seeing cost-cutting moves that will help the bottom line. Krispy Kreme is still a long way from turning itself around, but this down-on-its-luck company -- thankfully, one of the very few picks in the Motley Fool Stock Advisor newsletter service that has suffered -- is starting to inch its way in the right direction.
Don't laugh too hard, now. Some of last year's best-performing stocks were companies like Kmart (NASDAQ:KMRT) and Apple Computer (NASDAQ:AAPL) that many had left for dead just a couple of years ago. I believe that Krispy Kreme can come back, eventually, and is an attractive investment in the mid-single digits. But why, you ask, should you back a lonely company in its time of need, its time of bleed? Well, isn't that what Friends are for?
Sink your teeth into some more related Foolishness:
- Krispy Kreme: A Retrospective
- What? You were never invited to the Tyco toga bash?
- Don't worry, the winners outweigh the losers -- by far -- in the Motley Fool Stock Advisor.
Longtime Fool contributor Rick Munarriz really did drive to a Krispy Kreme store once to collect his free dozen doughnuts after a Florida Marlins 13-hit performance. The Fool has a disclosure policy. He is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early.
