Diets reduce doughnut demand

Friday, May 7, 2004 | 9:41 a.m.

WINSTON-SALEM, N.C. -- Krispy Kreme Doughnuts Inc., the second- largest U.S. doughnut chain, cut its annual profit forecast today and said first-quarter earnings were lower than expected as the Atkins and other low-carbohydrate diets reduce demand for its baked goods. The shares fell as much as 26 percent.

Profit from continuing operations is expected to be 93 cents to 95 cents a share this year, or about 10 percent lower than forecast, and 16 cents in the quarter ended May 2, the Winston-Salem, North Carolina-based company said in a statement. The company also is divesting its Montana Mills unit and closing nine stores.

Consumers shunning sugar and starch weakened sales of Krispy Kreme's doughnuts at supermarkets, prompting the company to lower its forecast .

for the first time. Sales gains have resulted from expansion as Krispy Kreme's existing stores haven't been as profitable. Shares of Krispy Kreme plunged $7.41 to $24.39 at 10:46 a.m. in New York Stock Exchange composite trading after falling as low as $23.50, their biggest drop ever. They had risen as high as $49.37 in August 2003.