Dunkin’ Underwriter Goldman Sachs Gives Stock ‘Sell’ Rating

Dunkin’ Brands Group Inc. was initiated with a “sell” rating by Goldman Sachs Group Inc., one of the banks that managed the coffee and doughnut chain’s initial public offering in July.

With 6,800 U.S. stores mostly in New England, New York and other eastern areas, Dunkin’ has sought to draw customers in the afternoons with snack foods such as stuffed breadsticks. Last month, the chain also began selling K-Cups for Green Mountain Coffee Roasters Inc. (GMCR)’s Keurig brewing machine.

Weak consumer sentiment may curb Dunkin’s sales, “despite a boost” from the introduction of single-serve K-Cups, Michael Kelter, a Goldman Sachs analyst in New York, wrote in a note today after initiating coverage of the company. Dunkin’s U.S. business is “highly macro-sensitive against an uncertain economic backdrop,” he said.

The Canton, Massachusetts-based company, also the owner of Baskin-Robbins, raised $423 million in an IPO before an over- allotment. Goldman Sachs was among the banks that led the Dunkin’ offering and exercised the over-allotment option to buy 3.3 million additional shares for $19 each.

Dunkin’ rose 2 cents to $27.02 at 4 p.m. New York time in trading on the Nasdaq Stock Market. Since the IPO the shares have gained 42 percent.

The company’s growth plan includes doubling the number of U.S. stores to 15,000 during the next 20 years. Kelter estimates that the chain may be able to open about 3,200 more Dunkin’ Donuts in the U.S. for a total of 10,000 shops.

McDonald’s Corp. (MCD) has about 14,000 U.S. locations, while Starbucks Corp. (SBUX) has 10,900.

To contact the reporter on this story: {Leslie Patton} in Chicago at lpatton5@bloomberg.net

To contact the editor responsible for this story: Robin Ajello at rajello@bloomberg.net

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