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Is Dunkin’ Brands the Right Choice for Your Portfolio?

May 06, 2014 | About:
Suravi Thacker

Suravi Thacker

1 followers

Doughnut and coffee provider, Dunkin’ Brands (DNKN), is yet another retailer, which blamed colder winters for its lackluster performance. However, there is more than what meets the eye. The retailer’s results are not as bad as it seems despite being affected by lower footfall due to harsh weather. Dunkin Brands posted first quarter results last week, which missed the analysts’ expectations and led to a decline in stock price.

Delving Deeper

Revenue surged 6.2% over last year, clocking $171.9 billion. This increase in top line was driven by higher same store sales in most of its business divisions. The Dunkin’ donuts U.S., the largest segment for Dunkin Brands, registered a same store sales growth of 1.2%, whereas Baskin-Robbins International division witnessed a 0.5% increase in the same.

Earnings for the quarter dropped 3.5% to $23 million as lower footfall and colder weather hampered its sales as well as its costs. Because of bad weather people preferred to stay at home instead of going out. Moreover, sand storms affected store operations, leading to higher costs. In fact, higher food prices have also been a cause of concern for most of the food retailers since it has led to shrinking margins and lower profits.

Nonetheless, Dunkin’s peer Starbucks (SBUX) seem to remain less affected as it posted blockbuster results last week. Despite the bad weather, the retailer sold enough coffee to beat the Street’s performance expectations. In fact, its same-store sales growth was a whopping 6% during the quarter, much higher than that of Dunkin' Brands.

A Host of Strategies Made

However, Dunkin' Brands has been quite active on the strategic front and its numerous moves have been quite fruitful. For example, new items added to the retailer’s breakfast menu, such as wraps and sandwiches, have been quite successful even during the afternoon time, resulting in higher sales.

The food retailer’s expansionary efforts are not limited to introducing new food only. Dunkin’s launch of new flavors and low-fat ice creams have resonated well with customers. Therefore, Baskin-Robbins is doing really well and with new introductions awaited in the coming months, this segment should grow further.

Although Dunkin' Brands has a smaller presence as compared to rival Starbucks, the company is making all the efforts to grow. After opening 790 new stores during fiscal 2013, it now plans to add another 685 to 800 new stores during this year.

Baskin Robbins is also trying to improve its service to attract customers. In addition to adding cakes to its list of offerings, it now introduced the service of ordering ice cream cakes online. This service was introduced earlier this month and should be able to bring in more customers.

Additionally, Dunkin' Brands has launched a new mobile app and a loyalty card program which will add reward points on every purchase. Moreover, it will help the company give customized offers on the basis of past purchases made.

Bottom Line

Although the food and coffee retailer was unable to post a delightful quarter, its future looks bright. With so many initiatives to lure customers to its stores and a growing network of stores this company looks pretty interesting. Moreover, it is making efforts to speed up service and delivery, which will reduce the waiting time for customers. Despite a mixed quarter, the company stuck to its outlook for the year. Therefore, Dunkin' Brands looks good to go.


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Comments

kfh227
Kfh227 premium member - 7 months ago

DnD, Tim Hortons and Krispy Kream can all be destroyed by a single donut chain that actually makes good donuts. Everyone knows that the donuts are garbage. I'll never buy DnD. I'm simply waiting for the next donut company to go public.

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