Crumbs Closing Marks The End Of The Cupcake Bubble?

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As of Monday, July 8th, Crumbs Bake Shop Inc (OTCMKTS:CRMB) has closed all 49 locations and is considering its options, including bankruptcy. Crumbs Bake Shop is a national chain based in New York with outlets in 10 cities including the Washington area that specializes in cupcakes.

Crumbs is famous for its huge frosting-covered cupcakes in flavors such as cookie dough and red velvet cheesecake, selling for upwards of $3.50 apiece.

The company IPOed in 2011 at the height of the gourmet-cupcake craze. However, things turned sour quickly. Analysts say Crumbs financial outlook is bleak after several years of losses, little cash, and a food craze that is petering out.

Crumbs closing and probable bankruptcy is also symbolic of the end of the cupcake craze. As Joshua M. Brown and others have pointed out, despite the excesses of the 21st century, the market for $4 cupcakes is still relatively limited.

Statements from Crumbs Bake Shop

Crumbs Bake Shop Inc (OTCMKTS:CRMB) released a statement yesterday. “Regrettably Crumbs has been forced to cease operations and is immediately attending to the dislocation of its devoted employees while it evaluates its limited remaining options.” A spokeswoman later added those options could include a bankruptcy filing.

Kareem Wegman, who manages a Crumbs store in Brooklyn, told the Wall Street Journal that he heard about Crumbs closing from another employee. “I come into work today, I’m happy, I’m skipping to work, and suddenly I don’t have a job,” said Wegman, who has been an employee at the store for two years.

Attempted turnaround

Earlier this year, Crumbs closed nine money-losing stores during the last three months of 2013, then shuttered six more at the start of 2014, and announced there were more closures coming.

Edward Slezak became Crumbs’ CEO in the fourth quarter of last year, and was working to turn the firm around. Slezak oversaw the creation of a new licensing program to sell Crumbs-branded products in other stores, the closing of a number of unprofitable locations, as well as other initiatives to reduce overhead.

NASDAQ OMX Group, Inc. (NASDAQ:NDAQ) announced on July 1st that trading in Crumbs Bake Shop Inc (OTCMKTS:CRMB) was suspended due to not meeting minimum requirements for stock listing.

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