Krispy Kreme Doughnuts, Inc. (Nasdaq: KREM) today reported financial results for the three months ended April 29, 2001, the Company’s first quarter of fiscal 2002.

Systemwide sales, including sales of both company and franchise stores, increased 35.8% to $140.4 million in the first quarter, compared with $103.3 million in the first quarter of fiscal 2001. Sales were driven by an increase in company store sales of 19.1% to $60.7 million and an increase in franchise store sales of 52.0% to $79.7 million. On a comparable store basis, systemwide store sales were up 11.4% and company store sales increased 13.1%.

Total company revenues, which include sales from company stores, franchise operations, and Krispy Kreme Manufacturing and Distribution (“KKM&D”), rose 24.1% to $87.9 million in the first quarter, compared with $70.9 million in the first quarter of fiscal 2001. Sales from company stores increased 19.1% to $60.7 million; revenues from franchise operations were up 50.3% to $3.0 million; and KKM&D sales increased 35.2% to $24.2 million.

Net income for the first quarter was $5.7 million, an increase of 88.6% compared with $3.0 million in the first quarter last year. Diluted earnings per share increased to $0.20 in the first quarter of fiscal 2002 from $0.13 per share in the prior year comparable period.

Commenting on company’s financial performance, Scott Livengood, Chairman, President and CEO of Krispy Kreme Doughnuts, said: “It has been another great quarter for Krispy Kreme. Every business segment set new performance records. More importantly, our customers continue to exceed our expectations as we most recently experienced in Denver. The new first week sales record of $369,000 set by the Denver team reflects the emotional connection of this brand with our customers, both new and existing.”

During the quarter, six new Krispy Kreme stores were opened, including one new market in Denver. The total number of stores at April 29, 2001 was 180. Since the end of the quarter, Krispy Kreme has opened one additional franchise store in Houston and one additional franchise store in the new market of Modesto.

The company also increased earnings guidance for the remainder of fiscal 2002 and for fiscal 2003. Guidance for all of fiscal 2002 is now to earn $0.77 per diluted share versus the previous consensus of $0.69 per diluted share. The Company also provided an earnings estimate for fiscal 2003 of $1.00 per diluted share, an increase of 16% from the previous consensus estimates of $0.86 per diluted share, and an increase of 30% over fiscal 2002.

The 63-year-old North Carolina-based company is a leading branded specialty retailer of premium quality doughnuts, including the company’s signature Hot Original Glazed. Krispy Kreme currently operates 182 stores in 29 states.

Krispy Kreme can be found on the World Wide Web at www.krispykreme.com.

Information contained in this press release, other than historical information, may be considered forward-looking in nature and is subject to various risks, uncertainties and assumptions. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, estimated or expected. Among the key factors that may have a direct bearing on Krispy Kreme’s operating results, performance or financial condition are its dependence on franchisees to execute its store expansion strategy, supply issues, competition and numerous other factors discussed in Krispy Kreme’s periodic reports, proxy statement and other information statements filed with the Securities and Exchange Commission.

                         Krispy Kreme Doughnuts, Inc.
Summary Financial Results
For the First Quarter Ended April 29, 2001
(All dollar amounts in thousands except per share data)

Quarter Ended
April 29, April 30,
2001 2000 (1) $ Change % Change

Total revenues $87,921 $70,870 $17,051 24.1%
Operating expenses 71,195 59,164 12,031 20.3%
General and
administrative expenses 6,222 4,435 1,787 40.3%
Depreciation and amortization
expenses 1,872 1,595 277 17.4%
Income from operations 8,632 5,676 2,956 52.1%
Interest income 1,015 231 784 339.4%
Interest expense 39 480 (441) -91.9%
Loss from joint ventures 171 380 (209) -55.0%
Minority interest in consolidated
joint ventures 175 113 62 54.9%
Other expenses 39 39 >100%
Income before income taxes 9,223 4,934 4,289 86.9%
Provision for income taxes 3,504 1,901 1,603 84.3%
Net income $5,719 $3,033 $2,686 88.6%

Diluted earnings per share (2) $0.20 $0.13 $0.07 53.8%
Diluted shares outstanding (2) 28,839 22,502 6,337 28.2%

Segment Information

Revenues
Company store operations $60,694 $50,956 $9,738 19.1%
Franchise operations 3,006 2,000 1,006 50.3%
KKM&D 24,221 17,914 6,307 35.2%
Total revenues $87,921 $70,870 $17,051 24.1%

Operating Income
Company store operations $9,413 $6,660 $2,753 41.3%
Franchise operations 1,968 1,000 968 96.8%
KKM&D 3,823 2,718 1,105 40.7%
Unallocated general and
administrative expenses (6,572) (4,702) (1,870) 39.8%
Total operating income $8,632 $5,676 $2,956 52.1%

Operating Margins
Company store operations 15.5% 13.1% 2.4%
Franchise operations 65.5% 50.0% 15.5%
KKM&D 15.8% 15.2% 0.6%
Unallocated general and
administrative expenses 7.5% 6.6% 0.9%
Total operating income 9.8% 8.0% 1.8%

Depreciation and Amortization
Expenses:
Company store operations $1,397 $1,241 $156 12.6%
Franchise operations 18 18 – 0.0%
KKM&D 108 69 39 56.5%
Corporate administration 349 267 82 30.7%
Total depreciation and
amortization expenses $1,872 $1,595 $277 17.4%

Systemwide Sales
Company stores $60,694 $50,956 $9,738 19.1%
Franchise stores 79,656 52,391 27,265 52.0%
Total $140,350 $103,347 $37,003 35.8%

Comparable Store Sales
Company stores 13.1%
Systemwide 11.4%

(1) Certain amounts presented for the first quarter of fiscal 2001 have
been restated for a change in accounting policy for revenue
recognition in accordance with Staff Accounting Bulletin No. 101
(“SAB101”), “Revenue Recognition in Financial Statements.” The change
had no effect on earnings per share for the quarterly period.

(2) Diluted earnings per share and the number of diluted shares
outstanding for Fiscal 2001 have been restated for a two-for-one stock
split in the form of a stock dividend paid on March 19, 2001 to
shareholders of record at the close of business on March 5, 2001.