Dunkin' Brands Falls After Profit Forecast Trails Estimatesby
More breakfast competition may be hurting same-store sales
Dunkin' Donuts loyalty program lags Starbucks in the U.S.
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, Massachusetts-based company said Thursday in a filing, repeating a forecast it first gave in April. Analysts estimate $1.92, on average. The company also said Dunkin’ Donuts domestic same-store sales growth slowed.
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 to focus on introducing its new blended smoothies and other beverages. The move backfired, and Dunkin’ will probably bring back those drinks.
"It may have been a mistake, but we’ve been highly responsive to franchisees’ desire for simplification," Chief Executive Officer Nigel Travis said in an interview. The chain will look at adding those beverages back next year, he said.
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, Travis said. 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 12 percent to $43 at the close in New York. The decline trimmed Dunkin’s year-to-date gain to 0.8 percent.
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.