News

Dunkin' gives shareholders a little mid-summer delight

July 21, 2016

Dunkin' Brands investors got some profitable news this week that might help them fund an end-of-summer vacation. The company declared a quarterly cash dividend for shareholders of 30 cents per share of common stock. That nice little chunk of change will be paid out Aug. 31 to all shareholders of record at the close of business on Aug. 22. 

The brand, the parent behind both Dunkin' Donuts and Baskin-Robbins restaurants, also publicized its second-quarter financial results, including these highlights:
•    2.3 percent increase in revenues.
•    22.7 percent increase in diluted EPS to 54 cents.
•    14 percent increase in diluted adjusted EPS to 57 cents.
•    0.5 percent Dunkin' Donuts U.S. comparable store sales growth. 
•    0.6 percent Baskin-Robbins U.S. comparable store sales growth. 
•   198 net new restaurants worldwide, including 73 net new U.S. Dunkin' Donuts. 
•    Dunkin' Donuts K-Cup pods named a top new consumer packaged goods products.

In his summation of the second-quarter performance for the company, Dunkin' Brands Chairman and CEO Nigel Travis said the leadership was pleased that earnings per share and operating income grew at a "significantly faster" rate than revenue in the last quarter. 

"We are especially delighted with our efforts to continue to build our coffee authority, as evidenced by the second quarter growth in our espresso category and the launch of our cold brew coffee," Travis said. "We continue to improve the guest experience through digital technologies like on-the-go mobile ordering that enables DD Perks members to order in advance and skip to the front of the line."

The brand's Chief Financial Officer Paul Carbone said that the company has previously moved to an "asset-light" business model with a system-wide effort to sell as many company-owned stores as possible, including the vast number of Dunkin' Donuts locations in the Dallas market.

"As a result, (we) are updating our revenue growth target for 2016 to 3 to 5 percent from 4 to 6 percent. …We anticipate that by the end of the year, we will have fewer than five company-owned stores remaining," he said. "While the sale of these stores impacts our revenue growth, we do not anticipate that there will be a material impact to our profits. Therefore, we are reaffirming all of our other targets for our 2016 performance."

Key Q2 financial highlights 

Global second-quarter sales growth was mostly attributed to worldwide store development and Dunkin' Donuts U.S. comparable store sales growth. That growth for U.S. stores last quarter came from higher average tickets, offset by less traffic.  

Big product sales drivers were beverages, led by iced coffee and espresso-based beverages, as well as breakfast sandwiches, particularly the Grandde Burrito and Bacon Supreme Omelet sandwiches. At Baskin-Robbins, U.S. average tickets were also higher, driven by cups and cones sales, especially for the brand's new Warm Cookie Ice Cream Sandwich.

Second-quarter revenues increased over last year, mostly due to royalty income from system-wide sales growth and increased Dunkin' K-Cup license fees. These increases were offset by fewer company-operated restaurant sales and fewer ice cream sales. By late June, there were only 29 company-owned distribution points.

Second-quarter operating and adjusted operating income grew $13.6 million or 14.6 percent, and $8.3 million or 8.1 percent, respectively, from last year, mostly due to increased royalty income, offset by a decrease net margin on ice cream and other international market products. 

2016 fiscal year targets

Most company-wide targets were reiterated in the second quarter. However, revenue growth is now expected to be 3 to 5 percent, largely due to sales and anticipated sales of company-owned stores this year. Operating income (GAAP) is expected to grow 27 to 30 percent, with (GAAP) diluted earnings per share of $2.02 to $2.08 on a 53-week basis. The impact of the 53rd week on those earnings is approximately $0.03. Full-year share count guidance was also updated to 93,000,0000 (from 94,000,000).