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Dunkin' Q3 financials benefit from beverages despite lower traffic

October 25, 2018

Dunkin' Brands Group, Inc., a coffee and doughnut chain as well as ice cream brand, Baskin Robbins, released its Q3 financials and its board announced a quarterly cash dividend of $0.3475 per share, payable Dec. 5, to shareholders by end-of-day Nov. 26, according to a press release. 

Some key Q3 performance numbers include:

• 1.3 percent increase in Dunkin' U.S. comparable store sales.
• 1.8 percent growth in Baskin-Robbins U.S. comparable store sales.
• 6 percent increase in revenues.
• 69.4 percent increase in diluted adjust EPS to $0.83.
• 77 new Dunkin' and Baskin-Robbins locations worldwide. 
• 52 new U.S. Dunkin' locations.

"Dunkin' U.S. comparable store sales growth was led by strong beverage sales, coupled with new product innovation, and the Dunkin' Run snacking platform, which delivered our highest afternoon comparable store sales growth in more than two years. ..." Dunkin' Brands CEO and Dunkin' U.S. President David Hoffmann said in the release.

"Our new simplified branding for Dunkin' and our recently announced plans to transform the espresso experience at Dunkin' demonstrate our commitment to our beverage-led strategy and, importantly, we have strong alignment with our franchisees around the world." 

Dunkin' Brands CFO Kate Jaspon said the $100 million U.S. espresso initiative  is moving the chain beyond a leading drip coffee provider.

"We are also pleased to have completed our previously announced $650 million accelerated share repurchase program during the third quarter, demonstrating our continued commitment to utilizing our strong balance sheet to return capital to shareholders," Jaspon said in the release.

Q3 global systemwide sales grew of 5.2 percent largely due to worldwide store development, Dunkin' U.S. sales growth and Baskin-Robbins international sales growth. In the U.S., comp sales grew due to higher average ticket size, offset partly by lower traffic. The sales growth was attributed to sales of iced coffee, frozen beverages and breakfast sandwiches.

Baskin-Robbins U.S. Q3 growth also came as the result of higher ticket size, offset by lower traffic. Growth at that brand came largely as a result of beverages including shakes and smoothies, as well as the take-home category.

Some modifications were made in the company's forward-looking statement, including lowered expectation for other revenue growth (from high-single digit percentage to low-to-mid-single digit). It also said it expects an effective tax rate of 23 percent, while expectations for GAAP diluted EPS earnings per share of $2.60 to $2.64 (previously it expected $2.48 to $2.56) and diluted adjusted rose from $2.68-$2.72 to $2.80-$2.82.