Northeast C-Stores Lose Krispy Kreme

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Northeast C-Stores Lose Krispy Kreme

WINSTON-SALEM, N.C. -- Financial troubles are causing Krispy Kreme Doughnuts Inc., based here, to pull its retail operations out of the Northeast. Rhode Island's remaining store will close next month, as will the company's last store in Massachusetts, the Providence Journal reported.

"Krispy Kreme will close its retail stores located in Cranston [R.I.] and Dedham, Mass., on July 12," an e-mail from the company to the Journal stated. "Krispy Kreme products will no longer be available in local grocery and convenience stores."

However, Krispy Kreme outlets will continue operating at two locations in Connecticut -- the Mohegan Sun casino in Uncasville and Milford, according to the report.

The company's financial troubles stem from legal and regulatory problems, which arose as it tried to expand too fast. Shares faltered, from a high of $105 to less than $5. Currently, it stands near $10, the newspaper report stated.

As a result, the company's expansion plans halted. Cranford, R.I.-based Jan Cos., which operates the Mohegan Sun location, held the franchise rights to open 16 Krispy Kreme units in Southeastern New England, but opened only eight. "We basically got out of Krispy Kreme," Janice Mathews, Jan's vice president, told the Journal.

In addition, the wholesale end of Krispy Kreme proved too difficult for Jan Cos. to manage, added Mathews. Distribution to more than 100 Shaw's stores and 147 Hess convenience stores proved a "nightmare," she said. "The wholesale business was overwhelming," she said. "It was not something we could get used to doing."

At the corporate level, the struggles continue. Doughnut sales dropped 18 percent annually for the past two years, resulting in more store closings, the report stated.

"Krispy Kreme continues to evaluate its growth and positioning throughout the United States," the company told the paper.

One strategy the company is evaluating is ice cream. At its first-quarter fiscal 2008 meeting, CEO Daryl Brewster announced the company is testing a line of ice-cream products at a number of stores near its home base, including a doughnut sundae developed for hot-weather eating, the Wall Street Journal reported.

The ice-cream products, called Krispy Kreme Ice Kreme, are available in vanilla, chocolate and swirl flavors. The company also is offering the doughnut sundaes, which is a Krispy Kreme doughnut topped with any of the ice-cream flavors, as well as different toppings, such as chocolate sauce, sprinkles and caramel syrup.

Meanwhile, another coffee-shop chain that entered the New England area is also re-evaluating the move. Tim Horton's Inc., a Canadian company that bought its place in Southeastern New England in 2004, stated in a Securities and Exchange filing that sales in the region have not met expectations, prompting the company to review its operations here, the Providence Journal reported.

"Failure to establish the Tim Horton's brand in these markets in the near future will result in a viability review for some or all of these markets," the company stated.