CANTON, Mass. – Dunkin’ Brands earned net income of $229.9 million in 2018, a 15.2 percent decline year over year from 2017, the company reported Thursday. Earnings per diluted share in 2018 were $2.71, compared with $2.94 the year prior.
The dip in profit for the year came despite company revenue growing 3.6 percent to $1.3 billion in 2018.
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The decline in profit was largely attributable to an increase in provision for income taxes, from $12.1 million to $59.3 million. In the fourth quarter of 2017 the company had recorded an income tax benefit of $77.8 million, which skewed the 2017 results. Income before taxes increased to $289.2 million from $283.3 million in 2017.
Franchise fees and royalty income revenues increased 4.2 percent for the year to $578.3 million.
“In 2018 we made substantial progress with our blueprint for growth designed to evolve Dunkin’ U.S. into a beverage-led, on-the-go brand. Along with making an unprecedented investment into the business, we implemented a deliberate sequencing of strategic initiatives including simplifying our menu nationwide, making our first foray into national value, debuting our NextGen new store design, unveiling our new Dunkin’ brand identity, and successfully relaunching our espresso beverages served at the speed of Dunkin’,” stated David Hoffmann, Dunkin’ Brands CEO and president of Dunkin’ U.S. “While we did not drive consistent traffic momentum for the full year, we laid the foundation for future growth and, most importantly, along with our franchisees, are unified and well-positioned to capitalize in 2019 on our brand promise of ‘great coffee, fast.’ ”
In the fourth quarter, the company reported $319 million in revenue, a 1.5 percent increase year over year. Profit for the quarter was $53.2 million, compared with $134.7 million in the fourth quarter of 2017, largely the result of paying $91.1 million more in income tax in the last three months of 2018 than in the same 2017 period.
The company’s Dunkin’ U.S. segment reported a 2.3 percent year-over-year increase in revenue in the fourth quarter to $152.2 million, led by a 3.6 percent increase in royalty income to $123 million, offset by a 25 percent decline in franchise fees to $3.7 million. Segment profit increased 7 percent to $119.8 million in the fourth quarter. The U.S. segment reported no change in comparable store sales in the quarter, compared with a 0.8 percent growth one year prior.
The company’s Dunkin’ International segment reported revenue of $5.5 million for the quarter, a 0.9 percent year-over-year increase. Segment profit was $3.1 million, a 59.1 percent improvement on a year earlier. The increase in profit was attributed to a decrease in general administrative expenses and a loss-turned-profit in the company’s South Korea venture. Comparable sales growth was 1.1 percent for the segment in the quarter, compared with 1.6 percent one year prior.
The Baskin-Robbins U.S. segment reported a revenue of $9.1 million in the fourth quarter, a 9.2 percent decline year over year from $10.1 million. The segment experienced year over year declines in royalty income (124,000 decline to $5.3 million), and a decline in sales of ice cream and other products (a $434,000 decline to $835,000). The decrease in sales volume on ice cream also led to a lower net margin on the product.
Profit for the segment declined from $4.9 million in the fourth quarter of 2017 to $3.9 million in the fourth quarter of 2018. Comparable sales declined 3.7 percent in the quarter, compared with a 5.1 percent growth one year prior.
The Baskin-Robbins International segment reported a 5.1 percent decline in revenue to $24.3 million in the fourth quarter. Profit for the segment declined 27.9 percent to $5.2 million. The company said that decline was attributable to an increase in general and administrative expenses as well as a decrease in net margin on ice cream driven by an increase in commodity costs.
Chris Bergenheim is the PBN web editor. Email him at Bergenheim@PBN.com.
