Dunkin Brands Group Inc (NASDAQ: DNKN)
DNKN Beyond Breakfast
Dunkin Brands Group, or Dunkin Donuts, is one of the nation’s first stop on the notorious morning commute to jump start the day with a tall, hot cup of coffee. As of late, Dunkin Donuts, along with competitor McDonalds, have introduced all day menu offerings as a test effort and look to capitalize on the late day visitors. Most recently, Dunkin Donuts has revealed a chicken sandwich and a steak wrap as items available to those on non morning stopovers. In addition, new sweets have made an appearance on the menu in the form of “cronuts” or croissant donuts, as well as bacon glazed donuts which have shown to be quite popular.
DNKN reported their latest earnings report on April 23, 2015 and spiked higher in the trading session by 8%, the largest percentage gain in a single day since the company’s public debut in 2011. DNKN reported better than expected comparable sales in the Dunkin Donuts chain, responsible for nearly 75% of sales. An increase of over 8% in same store sales which is responsible for approximately 6% of total sales.
Dunkin’s earnings feat shocked analysts and their forecasts as the expectation was for DNKN to have taken a beating due to the severe winter in the Northeast, where the majority of stores are positioned.
Chief Executive Officer, Nigel Travis in a conference call noted “This was a strong quarter for us in many regards. We reported positive comps for all four segments of our business and we’re particularly proud of our domestic comps for both brands, especially in the face of such severe weather.
We also had another quarter of strong Dunkin’ Donuts stellar growth in the USA adding nearly 80 Dunkin’ Donuts stores. On the technology front, our DD Perks memberships are growing at a healthy pace. Our online cake ordering for Baskin-Robbins is contributing nicely to the segment’s comparable store sales growth. Combine all that with a successful debt refinancing in January and we had a very good start for the year.” You can read further into the conference call transcript at Seeking Alpha.
J. West, a Credit Suisse analyst boosted his estimates and rating to Outperform with a price target of $56.
“In sum, while this agreement offers a relatively modest benefit to DNKN’s earnings power (~2%), we believe any positive EPS momentum would be well-received at the current discounted valuation,” West said.
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Dunkin Brand’s is integrating a number of new alternatives to its business model working to improve performance such as menu modernization with healthier offerings that should fortify results in the coming quarters. It is important to note however that fast food market saturation is present and could cause concern for sustained future growth.