Shares of Krispy Kreme Doughnuts Inc. jumped 21 percent Tuesday after the troubled maker of the famous treats hired a food industry veteran from Kraft as its new chief executive.
Daryl Brewster, 49, who will also hold the title of president and join Krispy Kreme’s board of directors, previously headed up Kraft Inc.’s $6 billion North American snacks and cereals business. He started his new job at 7:30 a.m. with a warm glazed doughnut and a cup of coffee.
“I’m very excited to come here,” Brewster said from the company’s headquarters in Winston-Salem. “This is a storied brand that will celebrate its 70th anniversary next year. And our dedicated customers love the doughnuts.”
Shares of Krispy Kreme soared $1.32, or 21 percent, to close at $7.71 on the New York Stock Exchange. The stock, which traded at nearly six times its average volume, had dropped as low as $3.91 in the past year.
“The fact that he comes from Kraft and ran a $6 billion operation, and he’s now willing to take on this challenge, is a positive sign,” said Morningstar analyst John Owens. “It’s also a positive the board has come to the conclusion the restructuring guys have completed what needs to be done and the company is ready to move forward.”
Stephen Cooper, the company’s interim chief executive since January 2005 and chairman of turnaround firm Kroll Zolfo Cooper LLC, will move into a new role as chief restructuring officer.
Brewster said his first priority would be to immerse himself in the business.
“The first thing I plan to do is to listen as much as I can to our customers and associates and franchisees and get a good lay of the land,” he said. “I plan to make a lot of visits.”
Once the darling of Wall Street, Krispy Kreme’s troubles began in May 2004, when the company warned of a coming earnings drop that it blamed on the popularity of low-carbohydrate diets. The company’s stock sank.
The stock plunge was a harbinger. Store closings followed, longtime chief executive Scott Livengood was ousted and Cooper hired to try to revive the company. A report by a special committee of independent directors blamed Livengood and John Tate, the company’s former chief operating officer, for most of the company’s problems, saying they tried to “manage earnings” to meet Wall Street expectations.
In a statement, chairman Jim Morgan said Brewster “brings with him not only a wealth of practical know-how, but also a solid understanding of the opportunities, as well as the challenges, currently facing Krispy Kreme.
“Krispy Kreme has made significant strides in its turnaround and today’s announcement represents yet another step forward for the company,” Morgan said. “Over the past 13 months, we have strengthened our management team, effected successful franchise and operational restructuring, and realigned the organization to focus on profitability and growth.”
The company hasn’t filed an earnings report with the federal Securities and Exchange Commission in more than a year, which is why Morningstar continues to offer no rating on the company’s stock, Owens said.
“There is still a lot of uncertainty in regards to Krispy Kreme and the stock is very volatile,” he said. “This is seen as positive news, so I’m not surprised to see the shares way up.”