Investing dollars for donuts

by Jeff Gelski
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Another donut store chain dipped into the stock market in 2011. Dunkin’ Brands Group, Inc., the parent company of Dunkin’ Donuts and Baskin-Robbins, on July 26 announced an initial public offering of 22,250,000 shares of its common stock at a price of $19 per share on The NASDAQ Global Select Market. On Nov. 17 Dunkin’ Brands, Canton, Mass., announced the offering by certain of its stockholders of 22 million shares of its common stock at a price of $25.62 per share. On Jan. 3, 2012, the price closed at $24.74 per share.

Both Dunkin’ Brands and Krispy Kreme Doughnuts, Inc., based in Winston-Salem, N.C., and another publicly-traded company, had positive financial news in 2011 while forecasting more chain expansion.

Dunkin’ Brands has a goal of more than doubling the Dunkin’ Donuts footprint in the United States to reach 15,000 locations over the next 20 years, said Nigel Travis, chief executive officer of Dunkin’ Brands.

“Additionally, we announced last month we have begun actively recruiting franchises for markets in Texas, Colorado, New Mexico, Oklahoma and Nebraska, and the response so far by interested candidates has been very positive,” he said during a Nov. 1 earnings conference call. “Although we don’t expect new Dunkin’ restaurants to open in any of these markets until early 2013, we’re focused on keeping our development pipeline filled.”

He said internationally Dunkin’ Brands wants to improve its position in existing markets such as Japan, Korea and the Middle East.

Shares of Krispy Kreme Doughnuts trade on the New York Stock Exchange. The price, which closed at $6.52 per share on Jan. 3, 2012, has stabilized after trading as low as $2.56 per share in the summer of 2010.
Krispy Kreme reported net income of $4.7 million, or 7c per share, for the third quarter ended Oct. 30, 2011, which compared with $2.4 million, or 3c per share, in the previous year’s third quarter. Revenue increased 9% to $98.7 million from $90.2 million in the previous year’s third quarter. Same-store sales rose for the 12th consecutive quarter.

Krispy Kreme had 678 stores on Oct. 30, 2011, which was up from 649 stores on Oct. 31, 2010. International expansion remains a goal.

“Although our international presence has increased dramatically in the last few years to 448 locations at the end of the quarter, we anticipate achieving an international store base approaching 900 stores by calendar 2016,” said Jim Morgan, chief executive officer.

Krispy Kreme Doughnuts, Inc. has been active on the retail side as well.

“Turning to our off-premises channel, our glazed chocolate pie and new dipped cake donuts are now available in over 10,000 grocery stores, convenience stores and mass merchants,” Mr. Morgan said. “These two items expand our off-premise product assortment of signature yeast-raised and cake donuts as well as honey buns, mini crullers, fruit pies and snack-sized donuts.”

Krispy Kreme Doughnuts had U.S. retail sales of $117,055,100 for the 52-week period ended Nov. 27, 2011, which marked a 4% increase from the previous 52-week period, according to SymphonyIRI Group, a Chicago-based market research firm. Unit sales, however, were down 1.6% to 31,098,510. The sales covered supermarkets, drug stores and mass merchandise outlets, excluding Wal-Mart Stores, Inc.

Overall U.S. retail sales in the donut category rose 2.4% to $734,988,700 for the 52-week period ended Nov. 27, 2011, according to SymphonyIRI. Unit sales dipped 0.5% to 297,249,800.

Bimbo Bakeries USA led the category with sales of $194,748,800, up 0.6% from the previous 52-week period. Unit sales dropped nearly 6% to 61,908,200. Hostess Brands, Irving, Texas, was second with sales of $165,156,600, up 0.1%, and unit sales of 83,429,770, up about 4%.

Hostess Brands in 2011 introduced frosted devil’s food cake donettes that are dipped in a chocolate-flavored coating. They are available in grocery stores and convenience stores nationally.

Tastykake donuts are appearing in retail stores across a wider geographic region since Flowers Foods, Inc., Thomasville, Ga., completed its acquisition of Tasty Baking Co. Flowers Foods in 2011 introduced the Tastykake brand in Flowers’ core markets in the Southeast.

“I am pleased that our integration of Tasty is progressing as scheduled and meeting our expectations,” George E. Deese, chairman and chief executive officer of Flowers Foods, said Nov. 10 when the company reported third-quarter financial results. “During the quarter, we rolled out Tastykake products in our D.S.D. markets across the Southeast, and we will continue moving the brand into other Flowers markets.”

More than 1 million Tastykake donuts are produced daily. They include mini donuts, assorted donuts and donut holes.
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