updated 11/22/2004 10:34:08 AM ET 2004-11-22T15:34:08

Krispy Kreme Doughnuts Inc.’s third quarter earnings plunged 79 percent as the North Carolina company discontinued operations and closed stores amid a federal investigation into its bookkeeping. The stock tumbled more than 15 percent.

The company also withdrew its sales forecast Monday and said it would not provide an outlook for the current quarter and 2005.

Losses for the quarter were 5 cents per share, down from profit of $14.5 million, or 23 cents per share, a year ago. Excluding the one-time charges related to discontinued operations, the company earned $2.4 million, or 4 cents per share, in the latest quarter.

Analysts surveyed by Thomson First Call had expected Krispy Kreme to post earnings of 13 cents per share.

In morning trading, Krispy Kreme shares were down $1.82, or 15.8 percent, at $9.68 on the New York Stock Exchange — meaning the shares are off more than 70 percent since the beginning of the year.

“Clearly we are disappointed with our third quarter results,” chairman and chief executive officer Scott Livengood said. “We are focused on addressing the challenges facing the company and regaining our business momentum.”

Those challenges include a federal investigation into its accounting practices. The company said earlier this year that the Securities and Exchange Commission was looking into its franchise reacquisitions and its future earnings outlooks.

Total sales for the quarter ended Oct. 31 increased 1.4 percent to $170.1 million from $167.8 million in the third quarter of last year. Company store sales overall were up 9.6 percent to $121.2 million, though sales at company stores open at least one year fell 6.2 percent.

Fifteen new Krispy Kreme stores — 13 factory stores and two satellites — opened during the quarter. Nine stores, comprised of seven stores and two satellites, were closed.

That brought the number of stores systemwide at quarter-end to 429.

Copyright 2004 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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