FINANCIAL ANALYSIS
REVENUES AND COSTS
The majority of Krispy Kreme’s financial struggles stem from its overexpansion in the
early 2000s. Capital expenditures on opening new company and franchise stores far
outweighed the decreasing revenues on increasingly unproductive stores. The company
began to close stores and taper domestic expansion in 2005, and its financials have seen
mixed results. The company reported revenues of $461 million in 2006, down 15% from
$543 million in 2005. Net income, however, was a loss of $41 million, which is much
smaller than the $135 million loss in 2005, signifying an actual increase in net income.
These odd statistics reflect the company’s drive to cut costs. Indeed, operating costs in
2006 were $502 million, down 26% from $679 million in 20051 (see figure 1).