Shares of Dunkin Brands (DNKN, Financial) have risen by 9.5% in the first two months of this year. With the increase in consumer spending in the U.S. and a decline in gasoline prices, people have started splurging which is driving sales at such stores. Dunkin Brands has witnessed growing sales in the last few months, driven by its strategic efforts. Its recently reported fourth quarter numbers were also ahead of the Street’s estimates, sending its shares higher. Let’s take a look.
The tale of amazing numbers
Revenue for the quarter surged 5.5% to $193.2 million, as compared to the previous year. This was slightly higher than the analysts’ estimate of $191.4 million and was driven by the addition of new beverages and increased consumer spending in the U.S. Products such as breakfast sandwiches and the newly introduced dark roast coffee resonated with the customers. Thus, the average ticket size and consumer traffic surged at the Dunkin Donut outlets.
Also, the addition of 704 franchised locations in the last one year, and 260 restaurants in the fourth quarter, helped the top line grow. The company also remodeled 172 stores during the period, which attracted more customers.
Not just new stores but existing stores also added to the revenue base. Thus, systemwide same-store sales surged 4.5% during the quarter. The U.S. also registered growth, as it makes 75% of the total revenue. Same-store sales increased 1.4% in the U.S. during the quarter. The comp sales for the ice cream division, Baskin-Robbins, also jumped 9.3%, much higher than the estimate of 6.6%.
International sales were modest during the quarter due to the slowdown in the regions such as Japan and South Korea. Thus, same store sales grew 0.3% only. Nonetheless, the company managed to register a healthy bottom line. Earnings increased to $0.50 per share as compared to $0.39 per share in the prior year. Analysts were expecting it to be $0.47 per share.
Strategies galore
The coffee retailer has been broadening its offerings beyond breakfast options. Therefore, it has come out with a number of new products such as variations in the sandwiches and Donuts, Coolatta Lite with fewer calories for the health conscious customers and much more. The company has also increased the use of fruits and vegetables and has reduced the use of salt and sugar on the menu.
Dunkin Donuts also plans to add more new beverages in the U.S. outlets in the current year. These new items include frozen Dunkaccino and fruit smoothies. Also, it plans to introduce a new blended drink platform and is making mobile innovations for the customers. In fact, it will be adding a new mobile ordering system for its consumers and will take measures to speeden up the service at doughnut shops.
Furthermore, it plans to expand its presence by opening 1,400 new restaurants in China. Its loyalty program has also gained popularity and has reached a goal of 2.5 million members during the quarter. This will help in growing the transactions of the company.
Winding it up
Dunkin Brands has definitely been very successful in attracting customers through its well-made strategies of expanding its stores and adding new products to the menu. Also, it has raised its quarterly dividend by 15%, which delighted the investors, in addition to the announcement of a new share buyback program of $700 million. However, the only area of concern was its guidance, which disappointed the investors. Nonetheless, the ice cream maker’s impressive moves and a decent quarter makes it an interesting investment proposition.
