[The Company's] Board of Directors has elected the Company's Chairman of the Board, James H. Morgan, to the additional positions of President and Chief Executive Officer. ...Normally, I'm less than thrilled when an accountant is given the CEO's chair - it is an indication that the company is no longer growing its markets, but is instead focusing on its capital structure. At best, that means cutting costs to make operations more efficient, which improves the bottom line, but does not result in any real growth in sales.
Morgan brings over 25 years of management experience to the Company, including his most recent role as Chairman and Chief Investment Officer of Covenant Capital, LLC, an investment management firm which he founded. Previously, Mr. Morgan served as Chairman and Chief Executive Officer of Interstate/Johnson Lane, an investment banking and brokerage firm, which was acquired by Wachovia Corporation in 1999. After the acquisition, Mr. Morgan served as Chairman and Chief Executive Officer of Wachovia Securities, Inc.
For a penny stock, especially one that doesn't have sufficient income to cover expenses, that can be the kiss of death, but in this instance, it's a very wise move. Krispy Kreme has had phenomenal growth over the past few years, and their top line is impressive. However, their weakness is inefficiency - so at this moment in time, getting an accountant to clean up the books and streamline operations is critical, and growth in sales could be detrimental.
In the short run, cleaning up the books and streamlining operations can ensure that more of the top-line revenues end up as bottom-line profits ... and once they've got that straightened out, they can rotate in a new chief who's focused on real growth.
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