By Paul Nowell
The Associated Press

CHARLOTTE, N.C. - Shares of Krispy Kreme Doughnuts Inc. sank more than 15 percent Thursday after the doughnut maker said federal regulators were looking into the retailer's franchise repurchases and its recent profit warning.

In a statement, the company said it was cooperating with the Securities and Exchange Commission on an "informal, nonpublic inquiry."

"Krispy Kreme has no higher priority than the confidence of our shareholders, customers and employees," Scott Livengood, chief executive and chairman, said in the statement. "While we are confident in our practices, we understand and respect the SEC's responsibilities and will continue to cooperate fully throughout this process."

SEC spokesman John Heine declined comment.

On the New York Stock Exchange, Krispy Kreme shares lost $2.95, or 15.8 percent, to close Thursday at $15.71. The company's stock has taken a nosedive in recent months after reaching a 52-week high of $49.74 last August.

In the first three months of 2004, Krispy Kreme lost $24.4 million, its first quarterly loss since going public in 2000.

Shortly before that report, the doughnut maker said it was cutting its profit projection for this year by 10 percent because of lower demand for its high-calorie treats - which the company attributes in part to the low-carb diet phenomenon.

That announcement in early May drove down its stock price nearly 30 percent that day and it has continued to fall. Several shareholder lawsuits were subsequently filed against the company.

Founded in 1937, Krispy Kreme operates 387 factory stores in 45 U.S. states, Australia, Canada, Mexico and the United Kingdom.