Survey: Doughnut Sales Continue to Slide

NEW YORK – U.S. sales of packaged doughnuts have continued to slide since Krispy Kreme Doughnuts Inc. (KKD) warned last month that the low-carb craze had taken a bite out of business.

Doughnut sales volume industrywide fell 2.3 percent in the 12 weeks ended June 13 from a year earlier, worse than the 1.8 percent drop in the 12 weeks ended May 16, according to market research firm Information Resources Inc. (search) , or IRI.

The data tracks sales at grocery stores, drugstores, and mass merchandisers — but excludes sales at Krispy Kreme stores or at the world's biggest retailer, Wal-Mart Stores Inc. (WMT).

Early last month, Krispy Kreme slashed its profit forecast for the year by 10 percent, blaming the rapid proliferation of packaged foods aimed at consumers following low-carb diets for weakening doughnut sales, particularly in supermarkets.

Low-carbohydrate diets such as the popular Atkins and South Beach diets (search) eschew starchy foods like pastry, bread and pasta in favor of proteins like meat, fish and cheese.

At the time, Krispy Kreme executives cited IRI data showing a 0.4 percent drop in U.S. doughnut sales volume for the 12 weeks ended April 18. In the previous 12 weeks, it had risen 7.4 percent.

Despite industry sales trends that continue to weaken, Krispy Kreme's volumes were up in the most recent period, rising 18.4 percent from a year earlier. The company has cited the expansion of its packaged doughnut business to new retail customers for the consistent rise in its volumes, but has added that the costs associated with those additional accounts have hampered profit margins.

To compete effectively with innovative products being introduced by some of the big packaged food makers, Krispy Kreme said it will introduce several new incarnations of its signature doughnuts later this year, including a sugar-free doughnut, doughnut holes and mini-doughnut rings.

But the Winston-Salem, North Carolina, company is also trying to minimize its reliance on doughnut sales with the launch of a new line of frozen drinks at its retail stores and its own brand of coffee beans to be sold in supermarkets.

Krispy Kreme's share price has slid 40 percent since the company's May 7 warning, and analysts have said they expect more bad news from the company this year.

Still, Legg Mason restaurant analyst Glenn Guard said earlier this week in a note to clients that much of the negative news has already been factored into the stock, adding that now could be a good time for investors to buy.

Krispy Kreme shares were down 20 cents, or 1 percent, at $18.99 in afternoon trade Wednesday on the New York Stock Exchange.