July 24, 2014

Dunkin' Brands Reports Second Quarter 2014 Results

CANTON, Mass., July 24, 2014 /PRNewswire/ -- 

Second quarter highlights include:

  • Dunkin' Donuts U.S. comparable store sales growth of 1.8%
  • Added 151 net new restaurants worldwide including 75 net new Dunkin' Donuts in the U.S.
  • Revenue increased 4.6%
  • Adjusted operating income increased 3.3%; adjusted operating income margin of 49.3%
  • Diluted adjusted EPS increased 14.6% to $0.47
  • Board of Directors declares $0.23 third quarter dividend

Dunkin' Brands Group, Inc. (Nasdaq: DNKN), the parent company of Dunkin' Donuts (DD) and Baskin-Robbins (BR), today reported results for the second quarter ended June 28, 2014.

DUNKIN' BRANDS, INC. LOGO.

"Second quarter sales growth was below our expectations with Dunkin' Donuts U.S. comparable store sales not accelerating as fast or to the degree that we anticipated after a difficult first quarter. We believe this was largely the result of macroeconomic challenges facing consumers, as evidenced across the retail and the QSR industries, along with an unseasonably cold, rainy start to the spring season," said Nigel Travis, Chairman & CEO, Dunkin' Brands Group, Inc. "Dunkin' Donuts U.S. transaction growth was encouraging and comparable store sales gradually improved throughout the quarter with June average weekly sales reaching the highest volume on record.  We remain  confident  in our ability to drive long-term growth through our product and marketing innovation, including our mobile and loyalty programs. In fact, we're excited to announce that we recently eclipsed 7.9 million downloads of the Dunkin' Donuts mobile app, and we are nearing 1.3 million DD Perks Rewards members."

"In addition to the impact of Dunkin' Donuts U.S. comparable store sales, our full-year earnings per share target is also being affected by weak performance by our Baskin-Robbins joint venture in Japan along with lower-than-anticipated profit from the sale of ice cream in the Baskin-Robbins International business," said Paul Carbone, CFO, Dunkin' Brands Group, Inc. "While we are updating certain 2014 targets, we are maintaining our long-term growth targets."

SECOND QUARTER 2014 KEY FINANCIAL HIGHLIGHTS  


($ in millions, except per share data)

Three months ended


Increase (Decrease)

Amounts and percentages may not recalculate due to rounding

June 28,
 2014

June 29,
 2013


$ / #

%

Franchisee reported sales

$

2,536.4


2,397.6



138.8


5.8%


Systemwide sales growth

5.7%


5.5%







Comparable store sales growth (decline):










DD U.S. comparable store sales growth

1.8%


4.0%







BR U.S. comparable store sales growth

4.2%


1.6%







DD International comparable store sales decline

(3.1)%


(1.7)%







BR International comparable store sales growth (decline)

(1.6)%


2.6%







Development data1:










Consolidated global net POD development

151


151




—%


DD global PODs at period end

10,993


10,517



476


4.5%


BR global PODs at period end

7,412


7,110



302


4.2%


Consolidated global PODs at period end

18,405


17,627



778


4.4%


Financial data:










Revenues

$

190.9


182.5



8.4


4.6%


Operating income

87.6


76.8



10.8


14.0%


Operating income margin

45.9%


42.1%







Adjusted operating income2

$

94.2


91.2



3.0


3.3%


Adjusted operating income margin2

49.3%


50.0%







Net income

$

46.2


40.8



5.4


13.2%


Adjusted net income2

50.2


43.9



6.3


14.3%


Earnings per share:










Common-basic

0.44


0.38



0.06


15.8%


Common-diluted

0.43


0.38



0.05


13.2%


Diluted adjusted earnings per share2

0.47


0.41



0.06


14.6%


Weighted average number of common shares - diluted (in
millions)

107.2


108.2



(1.0)


(0.9)%




1 Prior year POD counts have been adjusted to reflect the results of an internal POD count audit.




2 Adjusted operating income, adjusted operating income margin, and adjusted net income are non-GAAP measures reflecting operating income and net income adjusted for amortization of intangible assets, long-lived asset impairments, and other non-recurring, infrequent, or unusual charges, net of the tax impact of such adjustments in the case of adjusted net income. Diluted adjusted earnings per share is a non-GAAP measure calculated using adjusted net income. Please refer to "Non-GAAP Measures and Statistical Data" and "Dunkin' Brands Group, Inc. and Subsidiaries Non-GAAP Reconciliations" for further detail.


Global systemwide sales growth in the second quarter was primarily attributable to global store development and Dunkin' Donuts U.S. comparable store sales growth (which includes stores open 54 weeks or more).

Dunkin' Donuts U.S. comparable store sales growth in the second quarter was driven by higher traffic and increased average ticket resulting from our continued focus on product and marketing innovation.  Growth was driven by beverages, led by Iced Coffee, Frozen Beverages, and Hot and Iced Espresso; by breakfast sandwiches and associated add-ons like Hash Browns, led by the Chicken Apple Sausage Breakfast Sandwich; and by donuts including the Blueberry Cobbler and flower-shaped donuts and the celebration of National Donut Day in June. Traffic growth accounted for more than half of the comparable store sales growth in the second quarter.

Baskin-Robbins U.S. comparable store sales growth was driven by sales of Cups & Cones, Cakes, and  Beverages as a result of a new program offering guests a free waffle cone with the purchase of a second scoop of ice cream, the Mother's and Father's Day holidays as well as the launch of online ice cream cake ordering.

In the second quarter, Dunkin' Brands franchisees and licensees opened 151 net new restaurants around the globe. This includes 75 net new Dunkin' Donuts U.S. locations, 47 net new Baskin-Robbins International locations, 17 net new Dunkin' Donuts International locations, and 12 net new Baskin-Robbins U.S. locations. Additionally, Dunkin' Donuts U.S. franchisees remodeled 94 restaurants during the quarter.

Revenues for the second quarter increased 4.6 percent compared to the prior year period primarily from increased royalty income due to systemwide sales growth.

Operating income for the second quarter increased $10.8 million, or 14.0 percent, from the prior year period primarily as a result of the increase in revenues and a gain recognized in connection with the sale of all company-owned restaurants in the Atlanta market. Additionally, the prior year period included a one-time $7.5 million charge related to a third-party product volume guarantee and a $7.0 million gain related to the sale of 80 percent of our Baskin-Robbins Australia business. Adjusted operating income increased $3.0 million, or 3.3 percent, from the second quarter of 2013 as a result of the increase in revenues and gain on the sale of company-owned restaurants in Atlanta, offset by the gain from the sale of the Baskin-Robbins Australia business recognized in the prior year period.

Net income for the second quarter increased by $5.4 million, or 13.2 percent, compared to the prior year period primarily as a result of the increase in operating income of $10.8 million and a $3.1 million decrease in interest expense, offset by a $9.2 million increase in income tax expense. Adjusted net income increased by $6.3 million, or 14.3 percent, compared to the second quarter of 2013, as a result of the increase in adjusted operating income and decrease in interest expense.

Diluted adjusted earnings per share increased by 14.6 percent to $0.47 for the second quarter of 2014 compared to the prior year period as a result of the increase in adjusted net income and a decrease in shares outstanding. The decrease in shares outstanding from the prior year period is due primarily to the repurchase of shares, offset by the exercise of stock options. During the second quarter, the Company repurchased a total of 1,260,000 shares.

SECOND QUARTER 2014 SEGMENT RESULTS


Amounts and percentages may not recalculate due to rounding


Three months ended


Increase (Decrease)

Dunkin' Donuts U.S.


June 28, 2014



June 29, 2013



$ / #

%


($ in thousands except as otherwise noted)

Comparable store sales growth


1.8%



4.0%







Systemwide sales growth


6.3%



8.2%







Franchisee reported sales (in millions)


$

1,813.2



1,704.5



108.7


6.4%














Revenues:












Royalty income


$

98,250



91,954



6,296


6.8%


Franchise fees


8,430



5,694



2,736


48.1%


Rental income


24,611



24,042



569


2.4%


Sales at company-owned restaurants


4,736



6,240



(1,504)


(24.1)%


Other revenues


423



742



(319)


(43.0)%


Total revenues


$

136,450



128,672



7,778


6.0%














Segment profit1


$

100,981



91,302



9,679


10.6%














Points of distribution


7,821



7,447



374


5.0%


Gross openings


105



87



18


20.7%


Net openings


75



63



12


19.0%




1 Prior year amounts reflect change in segment profit measure. Please refer to "Segment Profit Comparability" for further detail.


Dunkin' Donuts U.S. revenues of $136.5 million represented an increase of 6.0 percent year-over-year.  The increase was primarily a result of increased royalty income, as well as franchise fees due primarily to timing of franchise renewals and an increase in development year-over-year. The increases were offset by a decline in sales at company-owned restaurants due to the sale of all company-owned restaurants in the Atlanta market early in the second quarter.

Dunkin' Donuts U.S. segment profit in the second quarter increased $9.7 million over the prior year period to $101.0 million, which was driven primarily by revenue growth and a gain recognized in connection with the sale of the company-owned restaurants in the Atlanta market.

Amounts and percentages may not recalculate due to rounding


Three months ended


Increase (Decrease)

Dunkin' Donuts International


June 28, 2014



June 29, 2013



$ / #

%


($ in thousands except as otherwise noted)

Comparable store sales decline


(3.1)%



(1.7)%







Systemwide sales growth


3.5%



3.5%







Franchisee reported sales (in millions)


$

176.7



170.8



5.9


3.5%














Revenues:












Royalty income


$

3,859



3,535



324


9.2%


Franchise fees


635



342



293


85.7%


Rental income


49



31



18


58.1%


Other revenues


(22)



23



(45)


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