Dunkin' Brands (DNKN, Financial) reported mixed financial results for second-quarter 2014. It saw 13% growth in its earnings, despite a sluggish environment and tough competition across the industry. However, the company witnessed solid transaction growth during the quarter that helped the company to register top line growth. Dunkin’ Brands, along with its parents companies such as Dunkin’ Donuts and Baskin-Robbins, is planning to enlarge its doughnut-and-coffee brand westward in the U.S. that should enhance its performance going forward.
Results are improving
The Canton, Massachusetts-based company for the second-quarter posted revenue of $190.9 million, an increase of 4.6% as compared to $182.5 million in the corresponding period a year earlier. However, its revenue failed to meet the average analyst forecasts of $198.7 million for the quarter. Its net income for the quarter came in at $46.2 million or earnings of $0.43 per share as against $40.8 million or earnings of $0.38 per share in the same quarter last year.
Looking ahead, the company has lowered its full-year forecasts for both the top as well as the bottom lines. It now expects its revenue to increase in the range of 5% to 7% from its earlier guidance of 6% to 8% for the year. Also, its earnings now range between $1.73 and $1.77 per share from the previous stated earnings guidance of $1.79 per share to $1.83 per share. It has additionally reduced its same-store sales growth in the range of 2% to 3% from earlier guidance of 3% to 4% for the entire year.
Focus on prospects
Dunkin’ is investing heavily in various growth prospects such as expanding its doughnut and coffee brand, improvising its international performance and aggressively engaged in resurrecting its ice cream shops in the home market. Also, the company is practicing various promotional offerings such as PM break promotion in order to accelerate traffic and ticket at its restaurants across the region. Besides, it continues to suggest limited time offer products such as Chicken Apple Sausage Breakfast Sandwich in order to better set apart the company from its competitors.
It is additionally offering trials of a few key products such as iced coffee, iced and hot espresso, iced tea and Coolattas that should drive its traffic in the remaining quarters. It is effectively executing its perks programs. In addition, it is expected to increase prices for a few selected menu items in the second half of the year. Moreover its franchises across the region and abroad are effectively implementing the coffee break offers to bring guest to its restaurants in the afternoon. The company has experienced exciting volumes in a couple of months during the reported quarter, and the volume continues to grow at a healthy pace. These smart moves should possibly should enhance its performance and drive value for shareholders in the long-run.
Dunkin’ is also rolling out beverage trails and looks solid to expand its day part section. This certainly creates other emergent growth drivers for the company in the future. The company is also investing heavily in the new product development and technology. It is investing in the digital menu boards. The company is also excited about the 8 million downloads for the Dunkin Donuts mobile app. These are really encouraging signs and should enhance its performance in the second-half of the year.
Meanwhile, Dunkin’ remains on track to re-engineer its doughnuts shops across the region. It has opened approximately 75 new incremental restaurants to its profile. Also, it remains on track to soon announce location for its first five Dunkin stores in California. The company has approximately 2000 Dunkin Donuts stores in the United States. Moreover, it has inaugurated around 12 new Baskin Robbins locations in the United States.
Its international restaurant profile also looks good with the opening of 50th Dunkin Donuts stores in Germany. Dunkin’ has also opened its first Dunkin Donuts restaurants in Luxembourg and its first Baskin Robbins in Philippines. Baskin Robbins had same-store sales growth of 4.2% in the reported quarter. These new stores will certainly enhance its sales and drive its growth in the long-run. The company had significant 1.8% growth in its same-store sales.
Conclusion
Dunkin' is investing in growth strategies that should drive its growth in the future. Its new store openings look good investment that should augment its growth and drive value for shareholders. It is also executing various initiatives that will possibly help the company to better differentiate its offerings and fetch traffics. The analysts have estimated CAGR of 14.60% for the next five years that indicate strong growth prospects for the company in the future. The analysts are also seeing CAGR of15.0% this year and 14.80% next year respectively that offers short-term returns on the stock.
