Krispy Kreme names Kraft's Brewster CEO

Krispy Kreme names Kraft's Brewster CEO

Krispy Kreme names Kraft's Brewster CEO

Krispy Kreme Doughnuts Inc. named Daryl Brewster chief executive officer as it tries to rebound from accounting investigations and a slump in sales. The shares had their biggest rise in more than a year.

Brewster, 49, joins the second-largest U.S. doughnut chain after heading Kraft Foods Inc.'s North American snacks and cereals unit. He will replace Stephen Cooper, who became interim CEO in January 2005.

Krispy Kreme is shedding stores and restructuring operations after expanding too fast following a public offering in 2000. The company ousted CEO Scott Livengood and six other executives last year during an internal probe that found they may have inflated earnings to beat forecasts. The U.S. Securities and Exchange Commission and federal prosecutors are investigating Krispy Kreme's accounting for the repurchase of franchisees.

``How sweet it is. Here we have a heavyweight coming in,'' said Buzz Zaino, who oversees $2.8 billion including about 1 million Krispy Kreme shares at Royce & Associates LLC in New York. ``This is inherently a good business with a good product. It simply has to be managed properly.''

Shares of Krispy Kreme rose $1.03, or 16 percent, to $7.42 at 10:35 a.m. in New York Stock Exchange composite trading. That's the biggest rise since March 4, 2005, when the shares gained 25 percent. Before today, the stock plunged 87 percent since peaking in August 2003.

At Kraft, Brewster was responsible for over $6 billion in revenue and 20,000 employees as president of the snacks and cereals businesses in the U.S. and Canada, Winston-Salem, North Carolina-based Krispy Kreme said today in a statement.

Turning around Krispy Kreme involves getting ``the business up to the standards of the brand,'' Brewster said in an interview today.

``It tried to grow too fast,'' Brewster said. Under Cooper, Krispy Kreme ``has started to take the steps that are necessary to stabilize and turn around as we move forward. This sets the stage for what will hopefully be further growth for us.''

Brewster, a Newark, New Jersey native, said he brings from Kraft, the largest U.S. foodmaker, a ``real understanding of consumers, marketing and general management skills and leadership skills to rally'' employees and franchisees.

Krispy Kreme said today Cooper will remain with the company for a short time as chief restructuring officer.

After selling shares to the public six years ago, the company expanded rapidly. It had 144 locations in 2000 and now has about 320 stores.

The company hasn't reported earnings for five quarters and faces possible delisting by the New York Stock Exchange. Investors are also suing Krispy Kreme, alleging the company shipped more doughnuts than supermarkets could sell to meet profit expectations and mask slowing sales.

Livengood was removed after the federal investigations prompted the company to start its own probe. At the same time, the company hired Cooper, who led Enron Corp. out of bankruptcy, to succeed him. It also rehired Cooper's restructuring firm Kroll Zolfo Cooper LLC.

In August 2005, a report from a special committee of Krispy Kreme's board said Livengood and other officers may have inflated earnings to meet Wall Street's expectations.

The 250-page report said ``the number, nature and timing of the accounting errors strongly suggest that they resulted from an intent to manage earnings.''

In December, the company restated profit after discovering additional accounting irregularities. It said sales declined 24 percent to $130 million in the third quarter and that it had a net loss for the period. It didn't provide full results.