Dunkin' eyes long-term competitive differentiation

by Eric Schroeder
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Company ahead on efforts to streamline menu.
 

CANTON, MASS. — Systemwide sales at Dunkin’ Brands Group, Inc. in the first quarter grew nearly 5% in the United States, primarily through new store growth, but comparable store sales were flat as ticket growth was offset by traffic declines.

David L. Hoffmann, president of Donuts U.S. and Canada at Dunkin’

In a May 4 conference call with analysts, David L. Hoffmann, president of Donuts U.S. and Canada at Dunkin’, said breakfast sandwich sales increased behind value messaging, while iced coffee sales rose on the strength of the company’s Cold Brew platform.

“We are excited about our Fruited Iced Teas, which are available nationwide today as well as our unique Dunkin’ Energy Punch powered by Monster Energy, currently being offered across the Northeast and Miami,” Mr. Hoffmann said. “Dunkin’ Punch is an innovation that came directly from our franchisees and crew that we believe will especially appeal to our millennial customers.

“We’re also thrilled about the launch of our new frozen coffee. It’s the magic of our best-in-class iced coffee but now frozen. It’s an amazing product.”

Dunkin' Donuts recently debuted frozen coffee.
 

Segment profit at Dunkin’ Donuts U.S. in the first quarter ended April 1 was $107,974,000, up 7.5% from $100,444,000 in the same period a year ago. Total revenues increased 2.3% to $141,962,000 from $138,813,000.

Mr. Hoffmann said Dunkin’ has dedicated significant effort to streamlining its menu. The company began a 300-store streamline test in February and plans to roll it out to 800 additional restaurants later this year.

 “Obviously menu simplification does involve the elimination of some of our slower moving products — that’s why we are taking our time to test the impact of this s.k.u. rationalization — but we believe the benefits in the long run will help drive top-line sales and improve restaurant level margin,” he said. “This will continue to be a cultural mindset for our organization as menu simplification broadens into overall restaurant simplification.”

Baskin-Robbins U.S. segment profit rose 0.5% in the quarter, while revenues fell 0.1%.
 

Overall, adjusted net income at Dunkin’ Brands Group in the first quarter was $50.7 million, equal to 52c per share on the common stock, up 25% from $40.7 million, or 41c per share, in the same period a year ago. Revenues increased 0.5% to $190.7 million from $189.8 million. 

Nigel Travis, chairman and c.e.o. of Dunkin' Brands Group

“In the first quarter of 2017, we achieved mid-single digit operating income growth and double-digit earnings per share growth,” said Nigel Travis, chairman and chief executive officer. “I believe these results demonstrate the beauty and consistency of our asset-light 100% franchise business model. Our first-quarter results were delivered in an increasingly challenging environment for retail and restaurants. But despite this, our franchisees continued to invest in our brands. In fact, over the past two years, they have invested more than $1 billion into growing their Dunkin’ Donuts and Baskin-Robbins businesses.”

Dunkin’ said its Baskin-Robbins U.S. unit posted segment profit of $7,337,000 in the first quarter, up 0.5% from $7,300,000 in the same period a year ago. Total revenues, meanwhile, fell 0.1% to $10,547,000 from $10,561,000. 
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