Dunkin’ Brands tripled income in 4Q

Dunkin’ Brands Group Inc., the parent of the Dunkin’ Donuts and Baskin-Robbins chains, said Thursday net income for the fourth quarter tripled as traffic and sales increased during the period.

Dunkin’ Brands said earnings for the quarter ended Dec. 29 reached $34.3 million, or 32 cents per share, compared with $11.6 million, or 10 cents per share, in the year-earlier period.

Revenue for the Canton, Mass.-based company declined 4 percent to $161.7 million, compared with $168.5 million in the previous year. However, the company attributed the decline primarily to an extra week in the fourth quarter of 2011 and a one-time delay in revenue recognition associated with the shift in manufacturing to Dean Foods that adversely impacted quarterly sales of ice cream products.

Nigel Travis, chief executive of the Dunkin’ Brands Group and president of Dunkin’ Donuts U.S., called fourth-quarter results “strong,” and added, “We have a unique combination of strong brand heritage and significant U.S. and global restaurant expansion opportunities, which we are capitalizing on to drive profitable growth for both our franchisees and shareholders.”

The company reported that same-store sales at Dunkin’ Donuts locations open 54 weeks or more rose 3.2 percent in the quarter, fueled by an increased average ticket and higher traffic. Key sales drivers in the quarter included coffee, the brand’s Smoked Sausage breakfast sandwich and Bakery Sandwiches, and a limited-time offer of Dunkin’ K-Cup portion packs in Pumpkin, Peppermint Mocha and Hot Cocoa flavors.

Same-store sales at domestic Baskin-Robbins units open 54 weeks or more rose 1.5 percent, driven chiefly by sales of its Flavors of the Month, which included holiday-centric offerings such as Pumpkin Pie, Peppermint and Winter White Chocolate. Limited-time-only sundaes, such as the Warm Belgian waffle with Pralines 'n' Cream ice cream, also helped to stoke sales and traffic.

“Product innovation is a huge contributor to our success,” Travis said.

David Tarantino, an analyst with Baird Equity Research, wrote that the company “exceeded comps estimates for both Dunkin’ U.S. … and Baskin U.S. … strengthening our confidence that the company can produce consistent growth even against tough comparisons and in a difficult environment.

“Looking ahead to 2013, we remain optimistic that an impressive lineup of new beverages/sandwiches/K-Cups (characterized as the strongest pipeline in DNKN’s history) and emerging mobile/loyalty capabilities (capturing one-to-one marketing opportunities) can produce comps comfortably within the 3-percent to 4-percent guided range,” he wrote.

During the 13-week period, Dunkin’ Donuts franchisees and licensees opened 149 net new U.S. locations, while Baskin-Robbins closed 29 net U.S. branches. The period also saw the opening of 47 net new Dunkin’ Donuts International locations and 89 net new Baskin-Robbins International units.

Dunkin’ Brands said franchisees remodeled more than 200 outlets during the quarter.

The company ended the year with more than 10,400 Dunkin’ Donuts units and nearly 7,000 Baskin-Robbins restaurants.

For 2012, Dunkin’ Brands reported earnings of $108.3 million, or 93 cents per share, compared with $34.4 million, or a loss of $1.41, in the previous year. Revenue for the year increased 4.8 percent to $658.2 million from $628.2 million in 2011.

The company also reiterated its plans to expand Dunkin’ Donuts into California.

“A couple of weeks ago, we made the very exciting announcement that we're expanding to Southern California,” Travis told analysts in an earnings call. “The response to this news has been tremendous. ‘When will you get to California?’ is the most frequently asked question we receive on social media. Now, we're happy to finally have an answer, and we expect the first Dunkin' Donuts restaurant will open there in 2015.

“As we explained two weeks ago, we're targeting opening between 330 and 360 net new Dunkin' Donuts U.S. units this year, for a 4.5-percent to 5-percent net unit growth rate,” he said.

Contact Paul Frumkin at [email protected].
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