{"id":4023,"date":"2014-07-16T14:07:18","date_gmt":"2014-07-16T14:07:18","guid":{"rendered":"http:\/\/newsroom.chainstoreguide.com\/?p=4023"},"modified":"2014-07-16T14:07:18","modified_gmt":"2014-07-16T14:07:18","slug":"crumbs-to-be-continued","status":"publish","type":"post","link":"https:\/\/www.chainstoreguide.com\/offthechain\/2014\/07\/crumbs-to-be-continued\/","title":{"rendered":"Crumbs … To Be Continued?"},"content":{"rendered":"

Way back in September 2011, I posted an article called \u201cIs Pie The Next Cupcake<\/a>?\u201d that cited numerous sources regarding the growing popularity of pie and the declining interest in high-priced gourmet cupcakes. Well, the Los Angeles Times<\/em> and I may have been ahead of our time in referring to pie as \u201cthe \u2018in\u2019 dessert among those \u2018in the know\u2019 for food trends,\u201d and declaring cupcakes pass\u00e9, but last week\u2019s announcement that Crumbs is turning off its ovens and closing its 48 remaining stores came as no big surprise to many industry observers.<\/p>\n

Crumbs had its start in New York City in 2003, spurred by the popularity of Sex and the City<\/em> and the women\u2019s focus on the hip eateries that sold such decadent desserts. At that time, cupcakes were sold for close to $5.00 each, and they flew out the door as customers scooped up a dozen at a time. Sales per square foot approached that of foodservice behemoth McDonald\u2019s. Given such compelling unit economics, the chain quickly expanded.<\/p>\n

The menu also expanded from the colossal cupcakes that came in just a few basic flavors to more than 75 flavor options available from bite-sized to sharing size. Other baked goods such as cakes, pies, cookies, and brownies were available, but in the most recent fiscal year cupcakes accounted for more than 78% of net sales.<\/p>\n

Crumbs Bake Shop Inc. was acquired by 57th<\/sup> Street General Acquisition Corp. and taken public in June 2011 with 35 stores. By the end of 2011, there were 48 stores, 15 of which had been open less than a year. At the end of 2012 there were 59 stores, 11 opened that year, and in 2013 22 new stores opened, resulting in 70 locations in 12 states and the District of Columbia going into the new year.<\/p>\n

However, at the same time the company was planning and executing a major expansion, competition was heating up as more companies entered the gourmet dessert arena. Although net sales continued to increase, largely reflecting an increased store count, same-store sales began to decline and profits disappeared. In 2012 Crumbs reported a $7.7 million loss, and by 2013 the loss had nearly doubled to $15.3 million on net sales of $47.2 million. Six months later, NASDAQ delisted the stock, and the company reluctantly called it quits shortly thereafter.<\/p>\n

What went wrong? There\u2019s been a lot of discussion in the investment and foodservice communities about the demise of Crumbs over the past week, and the consensus comes down to several major catastrophic missteps:<\/p>\n