CHARLOTTE, N.C. – The chief executive officer of Krispy Kreme Doughnust, Scott Livengood, was ousted yesterday as head of the once-trendy chain whose stock price has plummeted amid a federal securities investigation and allegations of padded sales figures. Shares of Krispy Kreme jumped more than 10%.

The Winston-Salem, N.C., company’s board of directors announced the retirement of Mr. Livengood, who has been criticized for his handling of the company’s recent financial problems, as one of “a number of important actions to address the company’s current situation.”

Mr. Livengood, 52, who has been at the helm for seven years and led the company’s rapid rise, was replaced as CEO by Stephen Cooper, a turnaround specialist who most recently shepherded the Enron Corporation bankruptcy reorganization.

The company also warned that a persistent declines in sales may lead to a fourth-quarter loss.

Krispy Kreme said Mr. Livengood also retired from his positions as president, chairman of the board, and as a director of the company and will become a consultant on an interim basis. Mr. Livengood had served as CEO since 1998 and had been with Krispy Kreme since 1977.

“On behalf of the board, I want to thank Scott for his years of dedicated service to the company and for making himself available to Krispy Kreme as a consultant to facilitate the transition,” said Mr. Morgan.

Mr. Livengood made no comment in the company’s prepared statement. According to the company, Mr. Livengood did not receive any severance with his retirement but will be paid $45,833 a month, the equivalent of his current base salary, for the six-month term of his consulting agreement, which is renewable for an additional six months.

Mr. Livengood’s departure also triggers an option to purchase 330,125 shares of Krispy Kreme stock; he now has vested options to purchase more than 1.3 million shares.

In addition to announcing Mr. Liven good’s ouster yesterday, Krispy Kreme also warned that sales have continued to slide in the fourth quarter of the current fiscal year. For the eight weeks ending December 26, average weekly sales per factory store throughout the Krispy Kreme system were down 18%, according to the company.

The company said quarterly results will also be harmed by the substantial costs of dealing with its current legal and regulatory troubles, and it could post a loss for the current quarter.

Analysts surveyed by Thomson First Call had projected a profit of 5 cents per share for the fourth quarter.

Mr. Livengood, a North Carolina native, was instrumental in the company’s rapid growth in the 1990s and early this decade. After becoming president in 1992, he oversaw the opening of Krispy Kreme stores well outside the company’s traditional southeastern market. Krispy Kreme debuted in New York in 1996 and in Los Angeles three years later.

In 2000, the company went public at $21 a share and the stock price shot up from there. Each time Krispy Kreme opened a new store, it seemed, lines curled around the block.

But even as the company undertook rapid growth, there were underlying problems. Sales began to sag by early 2003, according to a recent filing in a shareholder lawsuit. Officials knew of the problems, but attempted to hide them by routinely padding sales figures by doubling doughnut shipments to wholesale customers at the end of fiscal quarters, according to the suit.

Last May, Krispy Kreme reported its first-ever quarterly loss. At the time, the company blamed its problems on the popularity of low-carbohydrate diets like Atkins and South Beach.

But the shareholder lawsuit and word of a formal probe by the Securities and Exchange Commission soon followed, and it became apparent that Krispy Kreme’s problems ran deeper than just a diet fad.

The SEC investigation is probing Krispy Kreme’s accounting for franchise buybacks and its earnings outlooks and is facing shareholder lawsuits. In November, Krispy Kreme post ed a $3 million third-quarter loss.

Earlier this month, the company said it was restating earnings for the last three quarters of fiscal 2004. That came after allegations in a shareholder lawsuit that the company padded shipments to hide declining sales over the last two years

In its latest SEC filing, the company said it continues reviewing other errors and proposed adjustments that could result in the company’s net income for the year being trimmed by as much as 7.6%.

The company’s stock, which peaked near $50 in the summer of 2003, closed at an all-time low of $8.72 on Friday.

Krispy Kreme’s stock closed yesterday up 89 cents, or 10.21%, to $9.61.

Krispy Kreme has closed a number of stores since May and taken other steps to address its problems.

Replacing Mr. Livengood as president will be Stephen Panagos, the company said. James Morgan, who has served as a director of the company since July 2000 and vice chairman since March 2004, has been elected chairman, Krispy Kreme said.

Messrs. Cooper and Panagos are both associated with Kroll Zolfo Cooper LLC, which Krispy Kreme has retained to be its financial adviser and interim management consultant. Mr. Cooper now acts as interim CEO, president and COO of Enron.

According to Krispy Kreme, Mr. Cooper has more than 30 years’ experience leading companies through operational and financial restructurings.

“I am looking forward to working with all of the company’s employees, franchisees, vendors and other business partners to strengthen Krispy Kreme,” he said.