Dunkin Donuts maker triples profits amid fierce price war

By Gill Hyslop contact

- Last updated on GMT

Despite facing fierce competition in the foodservice market, Dunkin' Brands reported an increase in traditional donut sales. Pic: ©iStock/itakdalee
Despite facing fierce competition in the foodservice market, Dunkin' Brands reported an increase in traditional donut sales. Pic: ©iStock/itakdalee

Related tags: Revenue, Dunkin' donuts

Dunkin’ Brands Group reported its fourth-quarter net income more than tripled, despite a crowded breakfast market creating a price war.

The Canton, Massachusetts-based owner of Dunkin’ Donuts and Baskin-Robbins posted a fourth-quarter net income of $195.5m, or $2.13 per share, exceeding analyst expectations.

Revenue in the quarter rose to $227.1m, up 5.3% from the previous year, while net income saw a 248.3% increase to $139.4m, primarily driven by a favorable US tax return and an increase in operating income.

Operating income for the period increased $6.2 million, or 5.5%, from the prior year period, on the back of higher franchise fees and the first gain in store sales in nearly three years.

Highlights

  • Revenues increased 3.8% to $860.5m for the full year and 5.3% to $227.1m for the quarter.
  • Dunkin’ Donuts US comparable store sales growth of 0.6% on a 13-week basis and 0.8% on a 52-week basis.
  • Diluted EPS increased 82.7% on a 52-week basis, to $3.80 and 267.2% on a 13-week basis, to $2.13.
  • Added 440 net new restaurants worldwide, including 313 net new Dunkin’ Donuts in the US during the fiscal year.

Sales at US Dunkin’ Donuts restaurants – which account for around 70% of overall revenue – rose 0.8%, driven by breakfast sandwich sales as well as traditional donut sales.

For the 52 weeks ending December 30, 2017, the group posted a 3.8% increase in revenue to $860.5m from $828.9m the year prior.

Operating income rose 7.8% to $447m from $414.7m.

All-day value offers

“Our strategic focus on morning sales yielded improved customer counts in that critical daypart during the last three quarters of the year and we are actively working to drive afternoon traffic through p.m. beverages and food along with all-day value offers that kicked-off in January,”​ said Nigel Travis, Dunkin’ Brands chairman and CEO.

He added the company was “once again one of the fastest growing retail brands by unit count in the country.”

In a statement, the company said it had added more than two million members to its Perks loyalty program during the year, bringing total membership to approximately eight million, which increased sales of Dunkin’ branded consumer packaged goods by more than 30%.

Soft start to 2018

However, it said bad weather (causing a traffic slowdown in January), pressure from ‘value wars’ and a tighter labor market could result in a soft start to the new year.

The company will share its growth targets for 2018 and beyond at its investor day tomorrow.

Related topics: Cakes & Pastries, Snacks, Manufacturers

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