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1. Krispy Kreme’s strategy in 2004 included:
- Increasing the number of stores as well as increasing sales at old stores in order to obtain 20% annual revenue growth and 25% annual growth in earnings per share.
- Expanding internationally, adding stores in Europe, Australia, Canada, and Mexico.
- Improving on-premise sales by remodeling or closing down older stores and focus on the on-premise sales in new locations before selling packaged doughnuts in supermarkets.
- Improving appeal of on-premise coffee and beverage offerings in hopes of increasing beverage sales to 20% of store sales. Digital Java was acquired to help achieve this goal.
We noticed a couple things that indicated possible problems in the future for the company. Securities analysts that reviewed Krispy Kreme’s strategy agreed that the company’s increasing stock price would not last. They believed that the company would not reach its long term goals for growth. One reason analysts had a poor outlook on the company’s success was the fact that Krispy Kreme is a single-product concept company, which tend to have slow revenue growth.
Another reason for concern was the issue of unsuccessful stores. The company was opening too many stores too close together. New stores would either not do well themselves or cause older stores to lose sales. The company was aware of this problem but continued to expand. Because of this it could be expected that there would be future problems for the ...