Will Addition Of New Stores Drive Q1 2019 Growth For Dunkin’ Brands?

by Trefis Team
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Dunkin' Brands
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Dunkin’ Brands (NASDAQ:DNKN) is set to announce its Q1 2019 results on May 2, 2019, followed by a conference call with analysts. The market expects the company to report revenue close to $312.45 million in Q1 2019, which would be an increase of 3.7% on a year-on-year basis. The increase is mainly expected as the company continues to add more stores for both Dunkin’ Donuts and Baskin-Robbins. Market expectation is for the company to report earnings of $0.62 per share in Q1 2019, in line with $0.62 per share in the year-ago period.

 

Dunkin’ Brands reported $1.3 billion in Total Revenues in Fiscal 2018. This included 5 major revenue streams:

  • Dunkin’ Donuts US: $606.8 million in FY2018 (45.9% of Total Revenues). This includes royalty income from Dunkin’ Donuts stores in the US.
  • Dunkin’ Donuts International: $22.34 million in FY2018 (1.7% of Total Revenues). This includes royalty income from Dunkin’ Donuts stores internationally.
  • Baskin-Robbins US: $47.4 million in FY2018 (3.6% of Total Revenues). This includes royalty income from Baskin-Robbins stores in the US.
  • Baskin-Robbins International: $115.2 million in FY2018 (8.7% of Total Revenues). This includes royalty income from Baskin-Robbins stores internationally.
  • Advertising Fees and related Income: $493.6 million in FY2018 (37.3% of Total Revenues). The company started recognizing this separately in 2018. These are advertising fees paid on a weekly basis based on a percentage of franchisee gross sales as per the franchise agreements both in US and internationally.

 

We have summarized our key expectations from the earnings announcement in our interactive dashboard – What Has Driven Dunkin’ Brands Revenues & Expenses Over Recent Quarters, And What Can We Expect For Full-Year 2019? In addition, here is more Consumer Discretionary data.

 

Key Factors Affecting Earnings:

Revenue to grow:

  • Dunkin’ Brands has seen a steady growth in revenues and has increased from $1.25 billion in 2016 to $1.32 billion in 2018.
  • In Dunkin’ Donuts US, we see a continuous increase in the number of outlets over the years. In 2019 expected revenue is $643.9 million.
  • Dunkin’ Donuts International had a small fall in 2017 in royalty share for the segment. Post that it has been growing both in terms of outlets and average revenue per outlets. In 2019 expected revenue is $23.3 million.
  • Baskin-Robbins US segment has remained relatively flat in terms of revenues and the metrics thereof. Revenues have been in the range of $47-49 million since 2016 and is expected to be just above $48 million in 2019.
  • Baskin-Robbins International segment also has been nearly flat across the last few years. The growth in outlets and average revenue per outlet is offset by decreasing royalty share. In 2019 expected revenue is $118.7 million.

Trend in Expenses:

  • Total Expenses have been mostly in line with the Total Revenue except in Q4 2017 due to the net tax benefit accrued as the Tax Cuts and Jobs Act was enacted.
  • Advertising Expense contributes the highest (around 45%) in Total expenses except in Q4 2017 as the Total expenses drastically reduced due to the net tax benefit as mentioned above.  We expect the same to continue in 2019.

Full Year Outlook:

  • For the full year, we expect gross revenue to increase by 3.8% to $1.3 billion in 2019 led by an increase in Dunkin’ Donuts US revenues.
  • The company is expected to continuously add new stores which will boost the growth. In 2019 on average we expect 450+ new outlets to open.
  • EBITDA margin is expected to increase slightly to around 35.5%.

 

Trefis has a price estimate of $70 per share for Dunkin’ Brands stock. The value is based on the expectation that the company is on the growth path as they continue to expand reach by adding new stores in various segments across geographies.

 

 

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