NEW YORK – Krispy Kreme Doughnuts Inc. Thursday said federal regulators are investigating the doughnut chain's repurchase of franchises as well as its recently lowered earnings outlook.
Shares of Krispy Kreme Doughnuts Inc. (KKD) sank more than 15 percent Thursday after it said federal regulators were investigating the doughnut chain's repurchase of franchises as well as its recent profit warning.
On the New York Stock Exchange (search), Krispy Kreme shares lost $2.95, or 15.8 percent, to close Thursday at $15.71.
The company's stock has taken a nosedive in recent months after reaching a 52-week high of $49.74 last August.
The informal probe by the Securities and Exchange Commission (search) comes as Krispy Kreme is struggling to revitalize slumping sales, particularly in supermarkets.
"Krispy Kreme has no higher priority than the confidence of our shareholders, customers and employees," said chairman and chief executive Scott Livengood. "While we are confident in our practices, we understand and respect the SEC's responsibilities and will continue to cooperate fully throughout this process."
In May, Krispy Kreme reported that it lost $24.4 million in the first quarter, its first quarterly loss since going public in 2000.
Shortly before that, the Winston-Salem-based doughnut maker slashed its profit forecast for the year by 10 percent, blaming the popularity of low-carbohydrate diets such as the Atkins Diet (search) and South Beach, which frown on starchy foods like pastries and bread.
That announcement drove its stock price down. Several shareholder lawsuits were subsequently filed against the company.
Founded in 1937, Krispy Kreme currently operates 387 factory stores in 45 U.S. states, Australia, Canada, Mexico and the United Kingdom.
Reuters and the Associated Press contributed to this report.