Dunkin' earnings flat; stock up 46% since i.p.o.

by Eric Schroeder
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CANTON, MASS. — Dunkin’ Brands Group Inc., which went public on July 27, recorded relatively flat earnings in the second quarter of fiscal 2011 as the company focused on U.S. expansion and growing internationally. Net income in the quarter ended June 25 was $17,162,000, down narrowly from $17,337,000 in the same period a year ago. Total revenues in the second quarter rose 4% to $156,972,000 from $150,416,000.

“We delivered strong results for the quarter as a result of our continued focus on driving comparable store sales, expanding contiguously in the U.S., and accelerating international growth across our brands,” said Nigel Travis, chief executive officer of Dunkin’ Brands, Inc. and president of Dunkin’ Donuts. “Our emphasis on operational excellence and exciting product innovations, supported by great marketing, produced strong global system-wide sales and comparable store sales growth for Dunkin’ Donuts U.S., while our franchisees and licensees continued to drive new store growth, both domestically and internationally.”

Global system-wide sales increased approximately 7% during the second quarter, driven in large part by growth within Dunkin’ Donuts U.S. In the second quarter ended June 25, Dunkin’ Donuts U.S. posted revenues of $107.4 million, up 6% from $101 million in the same period a year ago. Segment profit for the period was $82.6 million, up 6% from $77.7 million a year ago.

By comparison, revenues within Dunkin’ Donuts International increased 17% to $3.8 million from $3.3 million in the second quarter of fiscal 2010. Segment profit during the period, meanwhile, fell 11% to $3.2 million from $3.5 million.

“Since the first of the year, we have significantly increased the strength of our balance sheet, and after the completion of our initial public offering, have reduced our annual interest expense by 50% to approximately $60 million through a combination of debt retirement, restructuring and repricing,” said Neil Moses, chief financial officer. “This financing activity resulted in non-recurring charges that impacted year-to-date net income. The performance of the business in the second quarter demonstrates the strength of our business model and integrity of our platform for future growth.”

For the six months ended June 25, overall company net income was $15,439,000, down 34% from $23,275,000, while revenues were $296,185,000, up 7% from $277,828,000.

Since offering its shares at an opening price of $19 on July 27, Dunkin’ has seen its stock price climb as high as $31.94, on Aug. 1. The company’s share price closed at $27.76 on Aug. 2.

In a separate announcement, Dunkin’ said it will begin offering Dunkin’ Donuts K-Cup portion packs at its retail locations. The packs will be offered in five flavors — Original Blend, Dunkin’ Decaf, french vanilla, hazelnut and Dunkin’ Dark Roast — at a suggested retail price of $11.99 for a 14-count box.

The Dunkin’ Donuts K-Cup portion packs may be used with the Keurig Single-Cup Brewing system.

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