Dunkin’ Brands Q2 2017 Results: Declining Traffic Leads To Disappointing Comp Growth
Dunkin’ Brands (NASDAQ: DNKN) reported its Q2 2017 results on July 27th and the company missed both revenue and EPS (earning per share) analyst estimates for this quarter. Further its disappointing comparable sales growth continued for this quarter as its Baskin-Robbins U.S. segment reported a 0.9% decline in comparable sales and Dunkin’ Donuts U.S. comparable sales grew only by 0.8%. The company’s ticket growth was offset by traffic declines, leading to slower comp growth. Further, the company faced a slight headwind from the weather in May, cooler weather in core markets impacted traffic.
Below is a summary of Dunkin’ Brands financial performance for Q2 2017:
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In Q2 2017, the company’s system wide sales grew by 6% in the U.S. driven by new store growth and comparable sales growth. Comparable sales growth was driven by breakfast sandwich sales and the company’s Cold Brew platform. The launch of frozen coffee was successful and the company is likely to build it further going forward. Dunkin’ Brands expects a low single digit growth in comparable sales for 2017. Below is a segment-wise summary of the company’s comparable sales growth for Q2 2017:
The negative comparable sales growth for Baskin-Robbins was due to a decline in traffic offset by increased ticket size. The international segment of this brand performed better as the focus on value created a positive impact in Japan and Korea.
Below is a summary of the company’s segment-wise revenues for Q3 2017:
Going Forward
- Dunkin’ Brands revised its guidance of new restaurant openings from 385 to 330-350 this year as it looks to redesign its restaurants and strike a balance between renewal of existing contracts by franchisees and expansion. The company wants to ensure that its franchisees have the necessary capital to implement the new design of its restaurants while opening stores. Further, as contract renewals become due, the company wants to ensure that franchisees focus on contract renewal as against new openings, to ensure maximum renewals. However, this change does not impact the company’s revenue and EPS guidance for 2017.
- The company will continuing focusing on its core strengths – coffee including the frozen coffee innovation and the ready to drink segment, donuts – offering fun and innovative products under this category and value offerings – such as the 2 for $2 Wake-up Wrap.
- Dunkin’ Brands will continue its menu simplification efforts as it builds its next wave of innovation as a beverage led, On-the-Go brand. The company is also looking to provide maximum convenience to its customers in terms of ordering and payment to develop itself as an On-the–Go brand.
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