Krispy Kreme facing SEC investigation

updated 11:15 a.m. ET July 29, 2004

WINSTON-SALEM, N.C. - Krispy Kreme Doughnuts, Inc., which recently blamed its first quarterly loss on the low-carb dieting phenomenon, said Thursday it was the subject of an “informal, nonpublic inquiry” by the Securities and Exchange Commission.

In a prepared statement, the company said it was cooperating fully with the SEC. The inquiry is focused on the company’s franchise re-acquisition's and its guidance on a reduction in earnings, the company said.

“Krispy Kreme has no higher priority than the confidence of our shareholders, customers and employees,” Scott Livengood, chief executive and chairman, said in the statement. “While we are confident in our practices, we understand and respect the SEC’s responsibilities and will continue to cooperate fully throughout this process.”

In May, Krispy Kreme reported that it lost $24.4 million in the first quarter, its first quarterly loss since going public in 2000.

Shortly before that, the Winston-Salem-based doughnut maker said it was cutting its profit projection for this year by 10 percent because of lower demand for its high-calorie treats — which the company attributes in part to the low-carb diet phenomenon.

That announcement drove its stock price down. Several shareholder lawsuits were subsequently filed against the company. Founded in 1937, Krispy Kreme currently operates 387 factory stores in 45 U.S. states, Australia, Canada, Mexico and the United Kingdom.

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