Crumble
Excerpt:
The nation's largest cupcake chain is no more. On Monday, Crumbs Bake Shop notified all employees that it would be closing all 65 stores at the end of the business day, reports The Wall Street Journal. The company is now evaluating its limited remaining options, including bankruptcy. Crumbs' shop closure comes on the heels of its delisting from the Nasdaq on July 1. The exchange's decision to force Crumbs to delist stemmed from Crumbs' failure to meet the minimum $2.5 million stockholders' equity requirement. Until today, Crumbs was the largest cupcake chain in America. However, as the cupcake craze has died down, the chain has struggled in an overcrowded marketplace. In the first three months of this year, the company's net loss widened to $3.8 million from $2 million the same period a year ago. Sales were at $9.1 million, down 25 percent from a year ago.Comment: For an analysis on why closing - 4 Reasons Why Crumbs Bake Shop Massively Failed. Image source. Another article (which I can't locate now) contrasted Dunkin Donuts with Crumbs. I occassionally will eat a cake donut ... but even this sweet tooth really not fond of cupcakes. This is not the Dunkin Donuts article I mention in previous sentence but here's a mention of it in context of Crumbs.
The death of the cupcake?
ReplyDeleteahoo Finance's senior columnist Mike Santoli notes it was "clearly not a great big juggernaut of a growth business. It was always kind of a local New York thing, loaded on with a bunch of debt."
In short, it was simply a poorly run company. Sweet treats can be a big business if the company selling them is run well. Take Dunkin Donuts. "Nobody says they have the best donuts," Santoli says. "They just happen to be the best operators at selling high volumes of coffee and sandwiches and donuts to a large number of people."
So the demise of a poorly run Crumbs certainly doesn't mean the end of cupcakes. Perhaps the cupcake business was never meant to be handed over to big public companies, or at the very least, big public companies that aren't good at being big public companies.
"Sales were up at Crumbs from 2012 to 2013. It's not as if they stopped selling cupcakes, but I do think the space got too crowded. It became more of a fad," Santoli says, adding that some form of "not really good for you" treats will always be available.
Rather than a story of the "death of the cupcake," Crumbs serves as a cautionary tale for entrepreneurs and investors alike. For the next "Crumbs" the lesson is to look at a model like Ben and Jerry's instead. The Vermont-based ice cream maker started small and is now owned by a multi-national.
For investors, the lesson of Crumbs is that their loss came at the expense of the big-money guys who took Crumbs public in 2010. They got paid while John Q Investor largely didn't. Santoli says it's a case of taking "invest in what you know" a little too far.
Final comment: Another reason I avoid IPOs
The Onion on closing.
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