Operations

Dunkin' goes digital, shifts menu after COVID hits Q2

July 30, 2020

Dunkin' Brands Group Inc. reported a slump in second-quarter earnings as the COVID-19 pandemic forced the company to close down much of its in-store breakfast coffee and donut service and pivot to carry out. The company is also closing hundreds of locations.

The parent of Dunkin' and Baskin Robbins reported gradual improvement over the past few months as stay-at-home orders eased and customers embraced its digital ordering strategy.

Adjusted earnings per share fell 43% to $40.1 million, or 49 cents during the quarter, compared with $72.3 million, or 86 cents in the year-ago period.

"For Dunkin', U.S. same store sales improved sequentially throughout the quarter, largely as a result of our ability to pivot quickly and introduce new menu items designed to appeal to our customers who are now visiting us later in the day," Dave Hoffman, chief executive officer at Dunkin Brands, said in the earnings announcement.

The company reported net income of $36.4 million, or 44 cents a share in the quarter, compared with $59.6 million, or 72 cents in the year-ago period.

Comparable same-store sales fell about 19% at its Dunkin' business in the U.S. Same-store sales subsequently showed improvements as stay-at-home orders were gradually lifted. A decline in foot traffic was partially offset by an increase in average ticket, as family bulk orders and premium priced specialty drinks boosted average purchase amounts.

Comparable store sales at Baskin Robbins stores in the U.S. fell 6% during the quarter. However, these sales also showed sequential improvements as the lockdown conditions eased. Reduced traffic was partially offset by higher average ticket size, as customers bought more ice cream quarts and cakes.

Global systemwide sales fell 21%, mainly due to the impact of the global pandemic.

Dunkin' Brand franchisees and licensees had a net reduction of 229 restaurants worldwide. This included the net closures of 40 Dunkin' stores in the U.S., which includes 10 Speedway locations; seven Baskin Robbins in the U.S., 180 Baskin Robbins overseas, mainly in Russia, Japan and India, and two Dunkin' International locations.

The company expects that about 800 Dunkin' locations in the U.S., including 450 Speedway locations, may permanently close due to a real estate portfolio rationalization effort. This represents about 8% of the U.S. footprint.