December 11, 2008 / 3:44 PM / in 10 years

UPDATE 1-Krispy Kreme Q3 loss widens on costs, lower US revenue

* Posts wider Q3 loss

* Higher costs, lower domestic revenue hurt

* Shares fall as much as 6 pct

Dec 11 (Reuters) - U.S.- based Krispy Kreme Doughnuts Inc KKD.N reported a wider third-quarter loss as the doughnut-shop chain’s domestic revenue fell and its costs ballooned.

The retailer, whose shares have lost more than a fifth of their value year-to-date, said the revenue decline reflects fewer company stores in operation, a fall in domestic royalty revenue and lower sales of mixes and other ingredients.

The sweet treats chain, which competes with privately held Dunkin’ Brands Inc and larger rival Starbucks Corp (SBUX.O), expects franchisees to close more stores, a move that would further hurt royalties and supply chain revenue.

Higher cost of doughnut mix and shortening resulting from higher agricultural commodity costs and higher gasoline prices also hurt results, the company said.

Krispy Kreme went public in 2001 with a successful offering, but in recent years struggled with restatements, investigations into its past accounting and a decline in doughnut sales that sent some of its franchisees into bankruptcy.

In October, Krispy Kreme’s Hong Kong franchisee sought liquidation, after it was squeezed by the global financial crisis.

The company, once a Wall Street favorite, said its net loss widened to $5.9 million in the third quarter ended Nov. 2, from $798,000 a year earlier.

Total revenue at the company, based in Winston-Salem, North Carolina, fell 9 percent to $94.3 million. Systemwide sales, which includes sales by both company and franchise stores, fell 1 percent in the quarter.

Krispy Kreme’s shares fell to a low of $2.35 but reversed losses to trade up 1 cent at $2.51 Thursday morning on the New York Stock Exchange. (Reporting by Dhanya Skariachan in Bangalore; Editing by Deepak Kannan)

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