February 5, 2015 / 11:21 AM / 4 years ago

Dunkin' Brands sales beat but CEO cautious on gas prices

(Reuters) - Dunkin’ Brands Group Inc (DNKN.O) reported better-than-expected quarterly sales, helped by U.S. demand for sandwiches and its newly launched dark roast coffee, though its CEO expressed caution about whether lower gas prices will help demand.

A drink and a doughnut are seen at a Dunkin' Donuts location in the Chicago suburb of Niles, Illinois, February 4, 2015. REUTERS/Jim Young

Gasoline prices have plunged 43 percent since June, according to U.S. government data, leaving Americans with more money for discretionary spending at Dunkin’, whose coffee and doughnut shops mainly compete with fast-food rival McDonald’s Corp (MCD.N).

In the United States, established Dunkin’ Donuts outlets, which account for three quarters of overall company revenue, were up 1.4 percent in the fourth quarter, while same-store sales jumped 9.3 percent at its Baskin-Robbins ice cream shops.

Analysts on average had expected sales to rise 1 percent at Dunkin’ Donuts and 6.6 percent at Baskin-Robbins, according to Consensus Metrix.

Chief Executive Nigel Travis said lower gas prices have not historically correlated with an increase in spending at Dunkin’ Brands’ stores, however.

Even though the economy “is clearly picking up,” Travis told Reuters he remained concerned about the earning power of consumers in the mid- to lower-income brackets.

Dunkin’ Brands, which has seen sales of its Dunkin’ Donuts packaged coffee and K-cups falter due to price competition from grocery stores, said average purchase size and consumer traffic increased at its U.S.

Dunkin’ Donuts, which has had success in broadening its offerings beyond breakfast fare to sandwiches and adding a wider range of coffees, said on Tuesday that it would introduce new beverages at its U.S. outlets, including fruit smoothies and a frozen Dunkaccino.

Quarterly net income attributed to Dunkin’ Brands rose to $52.5 million, or 50 cents per share, from $42.1 million, or 39 cents per share, a year earlier.

Excluding items, Dunkin’ Brands earned 46 cents per share.

Revenue rose 5.5 percent to $193.2 million.

Analysts on average had expected a profit of 47 cents per share and revenue of $191.4 million, according to Thomson Reuters I/B/E/S.

The company also raised its quarterly dividend by 15 percent. Dunkin’ shares edged up 1 percent.

Dunkin’ Brands recently completed a $2.6 billion deal to refinance its debt at what analysts called an attractive interest rate. It is pouring net proceeds from the deal into a share buy back program that is expected to be dilutive to 2015 earnings per share before becoming beneficial in 2016.

Dunkin’ reiterated it expects 2015 adjusted earnings of $1.83 to $1.87 per share.

Reporting by Lisa Baertlein in Los Angeles and Yashaswini Swamynathan in Bengaluru; Editing by Kirti Pandey and Christian Plumb

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