US doughnut maker Krispy Kreme stands accused of withholding data about its sales slump and knowingly double-shipping orders to meet sales estimates.
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Plaintiffs in a shareholder lawsuit have accused Krispy Kreme of being aware that the fast pace of its growth was saturating markets. According to Midnight Trader, former company and franchise employees told plaintiff’s lawyers that the company by mid-2003 was double-shipping wholesale orders to some grocers at the end of quarterly reporting periods to boost sales and earnings results temporarily, even though executives knew many of the doughnuts would be returned for credit later.
This kind of sales-padding, if proven to be true, will do untold damage to Krispy Kreme’s reputation. Stock in the doughnut company went into freefall last year, dropping 66%.
