CHARLOTTE, N.C. (AP) — Krispy Kreme Doughnuts said yesterday its loss narrowed substantially in its third quarter compared to results weighed down by charges for store closures a year ago.

But sales tumbled and the doughnut retailer, once a Wall Street favorite, said it expects more franchised store closures ahead.

Its shares bounced higher in morning trading but are still about 80 percent below their high for the past year.

The Winston-Salem-based company said its net loss for the quarter ended October 28 narrowed to $798,000, or one cent per share, compared to a net loss of $7.2 million, or 12 cents per share, a year earlier.

Revenue fell almost 12 percent to $103.4 million from $117.1 million a year ago.

Analysts polled by Thomson Financial on average expected the company to break even.

In the quarter, the company recorded a net credit to impairment charges and lease termination costs of $268,000, compared to a charge of $5.4 million a year ago.

"Most of the prior year charge relates to underperforming stores, including stores closed and likely to be closed," the company said in a statement.

Krispy Kreme said its franchisees are feeling financial pressure that, in some cases, has gotten worse this year.

"Franchisees closed 25 stores in the first nine months of fiscal 2008. The company believes franchisees will close additional stores in the foreseeable future, and the number of such closures is likely to be significant," the company said in a statement.

Krispy Kreme, which sold its first glazed doughnut in 1937, has been hurt by allegations of misconduct by former management, healthier eating trends, bankruptcy filings by several of its franchisees and competition from larger rival Dunkin' Donuts.

A stock that once traded at more than $50 bottomed out at about $4 in late 2005, and the company's board forced out two former executives it said were trying to "manage earnings" to meet Wall Street expectations.

Over the past year, the company has been touting a turnaround, and in October Krispy Kreme shuffled executive slots and said it would realign its franchise and company store operations. The reorganization would help the embattled doughnut maker improve sales and cut costs, executives said at the time.