Dunkin’ Brands falls after profit forecast trails estimates

CHICAGO – Dunkin’ Brands Group Inc., facing increased competition for consumers’ breakfast dollars, suffered its worst stock decline since it went public in 2011 after sticking with an annual profit forecast that missed analysts’ estimates.

Earnings this year will be $1.87 to $1.91 a share, excluding some items, the Canton, Mass.-based company said Thursday in a filing, repeating a forecast it first gave in April. Analysts estimate $1.92, on average.

Dunkin’ Donuts is facing more competition from fast-food chains, such as Taco Bell, that are now selling breakfast fare. And while Dunkin’ has said its rewards program is helping sales, it still trails Starbucks Corp.’s loyalty program, which boasts 10.4 million active U.S. members.

In an effort to simplify operations, the chain recently took some of its Coolatta frozen drinks off the menu. The move backfired, and Dunkin’ will probably bring back some of those drinks.

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“We will look at the portfolio of flavors next year and likely add a couple back in,” said Michelle King, a company spokeswoman. “We will continue to look at simplifying the menu and store operations even as we continue to introduce new innovative products.”

Franchisees, which operate almost all of the chain’s stores, are concerned about higher minimum wages and some overreacted by raising menu prices too much, CEO Nigel Travis said on an investor webcast Thursday. A tighter labor market also is making it harder to hire restaurant workers, he said.

U.S. same-store sales at Dunkin’ Donuts increased by about 1.1 percent in the third quarter, the company said. That’s a slowdown from 2.9 percent in the prior quarter.

The shares fell as much as 13 percent to $42.75 in New York. Dunkin’ had gained 15 percent this year through Wednesday.

The company also said about 100 U.S. Dunkin’ Donuts franchises in Speedway gas stations are closing this year and next. The locations represent about 0.1 percent of the chain’s domestic sales. Dunkin’ Donuts has about 8,200 U.S. locations, while the company’s Baskin-Robbins chain has 2,400.
There are Speedway gas stations in Coventry, Cranston, Johnston, Providence, Warwick and Woonsocket in Rhode Island, as well as Fall River, Seekonk and Swansea in Massachusetts. Hess Corp. sold its retail business to Speedway.

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