Dunkin' Brands Group, Inc.
) posted second-quarter 2014 results wherein earnings were in line
with the Zacks Consensus Estimate, but revenues missed the
consensus mark. The company's share price slid almost 5%, as it
lowered its guidance for 2014, after the soft performance in the
The company's adjusted earnings of 47 cents per share were in line
with the Zacks Consensus Estimate. However, the figure was higher
than the prior-year figure of 41 cents, mainly due to higher
Dunkin' Brands Group, Inc - Earnings Surprise |
The restaurateur's revenues increased 4.6% year over year to $190.9
million driven primarily by increased royalty income due to
system-wide sales growth. However, it missed the Zacks Consensus
Estimate of $199.0 million by 4.1%.
Inside the Headline Numbers
Dunkin' Brands operates through its Dunkin' Donuts and
System-wide comps increased 5.7%, better than the previous-year
quarter's increase of 5.5%. The comps growth was primarily due to
global store development and Dunkin' Donuts U.S. comparable store
Comps increased 1.8% in the Dunkin Donuts U.S. division, compared
with 4.0% growth in the prior-year period. The decline was due to
the sale of all company-owned restaurants in the Atlanta market
early in the second quarter.
In the Dunkin' Donuts International division, comps declined 3.1%,
worse than a decline of 1.7% in the prior-year quarter. Poor
results in South Korea primarily led to the decline.
Comps increased 4.2% in the Baskin Robbins U.S. division, better
than the 1.6% growth in the prior-year period. Baskin-Robbins U.S.
comparable store sales growth was driven by sales of Cups &
Cones, Cakes, and Beverages as a result of a new program
offering guests a free waffle cone with the purchase of a second
scoop of ice cream, the Mother's and Father's Day holidays as well
as the launch of online ice cream cake ordering.
At the Baskin Robbins International division, comps declined 1.6%,
which was worse than a rise of 2.6% in the prior-year quarter. Poor
performance in Japan led to the decline in comps.
In the second quarter, Dunkin' Brands franchisees and licensees
opened 151 restaurants worldwide. This includes 75 Dunkin' Donuts
U.S. locations, 47 Baskin-Robbins International locations, 17
Dunkin' Donuts International locations and 12 Baskin-Robbins U.S.
locations. Additionally, Dunkin' Donuts U.S. franchisees remodeled
94 restaurants during the quarter.
Share Repurchase and Dividend Update
Dunkin' Brands repurchased a total of 1.3 million shares.
The company's board of directors declared a third-quarter dividend
of 23 cents per share. The dividend will be paid on Sep 3, 2014 to
shareholders of record as of the close of business on Aug 25.
Guidance for 2014 Lowered
The company expects adjusted earnings per share in the range of
$1.73 to $1.77, down from the previously guided range of $1.79 to
$1.83. The new guidance represents roughly 13%-16% year-over-year
Dunkin' Brands expects revenue growth in the range of 5%-7%, down
from the previously expected range of 6-8%. Adjusted operating
income growth is expected to be within 7-9%, down from the prior
target of 10-12% growth.
Dunkin' Donuts U.S. comparable store sales growth is expected in
the range of 2% to 3%, down from the prior expectation of 3-4%
comparable store sales growth. However, the company continues to
expect Baskin-Robbins U.S. comparable store sales growth of 1% to
A major share of Dunkin' Brands revenues comes from the breakfast
segment, where companies like McDonald's Corp. (
), Starbucks Corporation (
) and Yum! Brands, Inc.'s (
) Taco Bell also operate. Such a crowded breakfast segment coupled
with a sluggish macroeconomic environment and reduced consumer
spending, hurt Dunkin' Brands top line to some extent. However, the
company has been working to expand its doughnut-and-coffee brand in
the U.S. and improve its performance globally .
Also, we are encouraged by the company's efforts to drive traffic
by trying to speed up service at its shops and redesigning prep
stations to meet busy morning hours. Additionally, menu innovation
and addition of healthier items will perk up sales in the coming
Dunkin' Brands currently has a Zacks Rank #4 (Sell).
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