Dunkin’ details four-prong plan for 2014

by Monica Watrous
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CANTON, MASS. — Four key areas define Dunkin’ Brands’ plans for 2014. After capping a strong fiscal year with profit growth of 36%, the parent company of Dunkin’ Donuts and Baskin-Robbins seeks to remain relevant in the evolving marketplace.

“It’s now a new year, and the global marketplace has never been more dynamic,” said Nigel Travis, chairman and chief executive officer, during a Feb. 6 earnings call with analysts. “That means we must position ourselves to capitalize on changing trends and consumer shifts to continue the incredible growth we’ve experienced over the last several years.”

First, the company plans to leverage its size and brand power on a global scale to strengthen its international business.

“Much of this will come through social media, building on Dunkin’ Donuts’ current 11 million-plus global Facebook fans and, (for) Baskin-Robbins, more than 7 million,” Mr. Travis said.

The second priority is improving accessibility, not only through technology, such as mobile applications and loyalty programs, but also with an increased number of drive-thru locations.

“Yes, to enjoy our wonderful products, our guests must come into our restaurants, but that doesn’t mean that the interaction with them begins and ends inside the four walls of a Dunkin’ Donuts or Baskin-Robbins,” Mr. Travis said.

Third, the company aims to globalize its U.S. disciplines and metrics. For example, the company recently announced a partnership with Liverpool Football Club, based on the success of its partnership with the Boston Red Sox, as well as the sport’s popularity among millennials and Hispanic consumers. The company said it also plans to expand its mobile and loyal marketing to international markets.

Sustainability represents the fourth area of focus for Dunkin’, which said it is improving its environmental footprint with responsible ingredient sourcing, better restaurant energy efficiency and more viable product packaging, with plans to replace its foam cups within the next few years.

In addition to the four-pillar strategy, Dunkin’ touts a differentiated menu as a critical component of its success.

“Our product differentiation and limited-time offer strategies are working,” Mr. Travis said. “Simply put, consumers crave, and I really do mean crave — I hear about it all the time — and love our beverages and food. We introduced more than 40 new products in 2013, and our product pipeline is stronger than ever.”

Part of that menu strategy may include blurring day parts at Dunkin’ Donuts.

“We have learned that the Dunkin’ brand has permission to go into almost any category, as long as it falls into being great food at a great value in a fast, friendly and convenient environment,” said John Costello, president of global marketing and innovation. “So, we see opportunities to continue to expand the breakfast platform. We think there are significant opportunities to expand the p.m. platform in sandwiches. But we also think that there are… opportunities to expand grab-and-go. … Boiling it all down, I’ve been amazed at the extendibility of the Dunkin’ Donuts brand.”

For the year ended Dec. 28, 2013, net income was $146.9 million, equal to $1.38 per share on the common stock, up from $108.3 million, or 94c per share, in fiscal 2012.

Revenues for the year totaled $713.8 million, up 8% from $658.2 million the year before.

Net income for the fourth quarter increased 23% to $42.1 million, or 39c per share, from $34.3 million, or 32c per share, for the same prior-year period.

Quarterly revenues rose 13% to $183.2 million from $161.7 million during the fourth quarter of fiscal 2012.

Comparable store sales growth for Dunkin’ Donuts U.S. grew 3.4% for the year and 3.5% during the quarter, driven by increased average ticket and higher traffic. Pumpkin-flavored coffee beverages and donuts, continued momentum for breakfast sandwiches and growth in afternoon menu items contributed to gains.

Comparable store sales growth for Baskin-Robbins U.S. increased 0.8% for the year, marking the third consecutive year of sales growth for the brand, and 2.2% during the quarter. Holiday flavors, including gingerbread, white chocolate and peppermint bark, as well as increased sales of cakes and take-home quarts, drove sales.

For fiscal 2014, Dunkin’ Brands expects comparable sales growth of 3% to 4% for Dunkin’ Donuts U.S. and 1% to 3% for Baskin-Robbins U.S. The company expects to add between 380 and 410 net new Dunkin’ Donuts U.S. restaurants and 5 to 10 net new Baskin-Robbins U.S. restaurants. Dunkin’ Brands also is targeting opening 300 to 400 net new restaurants internationally across both brands, inclusive of the anticipated closing of approximately 100 small locations in the Philippines. Dunkin’ Brands expects revenue growth of 6% to 8% and year-over-year adjusted earnings per share growth of in the 17% to 20% range, which includes expected savings from refinancing.
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