Dunkin Brands (DNKN, Financial) is on a roller coaster ride. The company is seeing good traction for its products in the market. The success of the company is well evident by the growing number of stores since 2008. With 2,500 stores initially Dunkin Brands is having an expansion plan of 3000 more stores by 2018. This looks concrete as the company is focusing on some key initiatives to improve its profitability. Under some cream aspects, Dunkin Brands is laser focused on expanding its menu to appeal large number of customers to its offering. Dunkin Brands is working on quality of its food by bringing innovations in the menu such as improving quality, increasing fruits and vegetables and reducing salt and sugar.
A look at its different segments
Dunkin Brands is trying its hand in other segments also. Under this, it is evolving its brands to incorporate health and wellness initiatives to it. In fact, back in 2008 the company did become a noticeable player in the health and wellness with the introduction of DD Smart and BB Bright choices. In addition, it is also working on adding healthier products to its menu. For example, its Turkey sausage sandwich introduced in 2013 became famous so well among the guests that the company has made this a permanent item in its menu. Seeing this success, Dunkin is engaged in promoting its Turkey Sausage sandwich on a multi-grain platform to enrich its breakfast offering.
The company has posted an upbeat outlook for fiscal 2015. The company sees good growth in the near term but is suspicious about its long term prospects on the back of certain headwinds which may affect its long term prospects. However, still Dunkin Brands seems well in position to deliver 3% to 4% Dunkin Donuts comp sales. It is expecting a solid 10% to 12% growth in the income.
Moving on, Dunkin Brands is also seeing strength in the beverage segment also where it is seeing positive response for last few months. It is further expected to excel in this segment as it grows its restaurant footprint in the U.S. Dunkin is also seeing good growth in the international markets as well. It is pleased to see good growth markets such as Europe, Germany, Austria and Sweden. But the company is quite worried about the negative trend in Korea. It is putting efforts for a turnaround in Korea’s performance.
Dunkin’s Baskin Robins is also responding negatively. In Japan, the joint venture also couldn’t impact its results and in fact Dunkin is now busy in sorting ways to improve its performance in Japan. However, Baskin Robins is showing good growth in markets such as Middle East and South Asia. It is bringing in some attractive offers to attract more customers such as aggressive marketing programs under which the customers will receive a free waffle cone on the purchase of second scoop. This has helped the company largely and contributed well in the sales growth. This is expected to improve Baskin Robins’ position in future.
Conclusion
Moving to the fundamentals, Dunkin is reasonable with a trailing P/E of 28.45 while the forward P/E of 21.43 indicates good earnings growth in the near term as well. The stock also looks like a strong investment option as it stands impressive with a profit margin of 23.56%. So, Dunkin Brands is definitely a good investment option as of now.
