Dunkin Brands’ Bet On Breakfast Is Paying Off

by Trefis Team
Dunkin' Brands
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Dunkin’ Brands (NASDAQ:DNKN) reported solid Q1 earnings on the back of strong performance by Dunkin’ Donuts in the U.S. Total revenues for the quarter ending March 31 stood at $152.4 million, an increase of 9.5% over the same quarter in the previous year. Dunkin’ Brands’ operating income rose 23.1% to $55.2 million as higher comparable sales helped the company increase profitability. Dunkin’ Brands upped its full year guidance to 7-8% revenue growth coupled with 12-14% growth in the operating income. The company competes with McDonald’s (NYSE:MCD), Starbucks (NASDAQ:SBUX), Krispy Kreme, Dairy Queen and Cold Stone Creamery to name a few.

See our full analysis of Dunkin’ Brands here

Strong Domestic Performance

Dunkin’ Donuts reported 12.7% increase in the revenue to $111.0 million for its Dunkin’ Donuts’ U.S. operations helped by strong comparable sales growth of 7.2%. Operating income for the segment grew 13.1% to $79.9 million. Sales were buoyed by addition of breakfast items such as Angus Steak, Egg and Cheese Breakfast Sandwich and the Turkey, Bacon and Cheddar, and Ham and Cheese Bakery Sandwiches. Restaurant chains across America are focusing on breakfast as they try to increase footfalls to boost profitability.

During the quarter, the company added 82 new stores out of which 45 were Dunkin’ Donuts in the U.S. For the full year, the company intends on adding 260 to 280 new Dunkin’ Donuts outlets in the U.S. Dunkin’ Brand also plans to double the number of Dunkin’ Donuts in the U.S. to 14,000 in the next twenty years.

Turnaround for Baskin-Robbins U.S. ?

Baskin-Robbins U.S. comparable sales surged 9.8% helped by new menu products such as Valentine’s Day Cake Bites and increased advertisement. However, revenues grew only 4.2%  due to declining outlets in the U.S. The number of Baskin-Robbins outlets have been decreasing in the U.S. in the last few years as the company tries to improve its operational efficiency and focuses on international operations.The company plans to close down 60 to 80 Baskin-Robbins in the U.S.

We estimate a $29 price for Dunkin’ Brands, which is about 10% below the market price. We are in the process of revising our estimates to incorporate Q1 earnings.

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