Dunkin' Earnings Preview: Same-Store Sales, Margins Under Spotlight

Feb 5 2014, 12:59pm CST | by

Dunkin' Earnings Preview: Same-Store Sales, Margins Under Spotlight

Dunkin’ Brands is scheduled to announce its Q4 and full-year earnings on February 6. In addition to the Dunkin’ Donuts brand, the company also runs the Baskin-Robbins chain. Through the three quarters, Dunkin’ generated an income of 97 cents a share. For the full year, the company’s management expects the earnings to be at the lower end of its guidance of $1.50-$1.53 per share. Shares of the company gained almost 50% in 2013 on the back of two solid quarterly earnings.
/>

We have a $48 price estimate for Dunkin Brands, which is in line with the current market price. Stores operating under the Dunkin’ Donuts brand in the U.S. contribute more than 75% to the company’s valuation, as per our estimates.

Here are some of the things to watch out for in the upcoming earnings:

a) Comparable Sales Growth

The same-store sales figure for the first three quarters for Dunkin’ Donuts stores in the U.S. stood at 1.7%, 4% and 4.2% respectively. Harsh weather in the first quarter impacted its sales during the first quarter, but the company has done well otherwise. In the long term, we estimate that Dunkin’ Donuts will be able to grow its comparable sales by 3.5-4% annually. This is primarily because there is a scope to increase sales during the afternoon segments. Till last year, Dunkin’ Donuts generated only 40% of the sales after 11am.

The company has upped its focus on sandwiches and pretzels – items that the diners are likely to consume during the daytime and in the evening. Dunkin’ is also refurbishing its existing restaurants to incorporate cushion seating and TVs in order to attract more customers during the daytime.

Comparable sales, or same-store sales, is an important measure to gauge a restaurant’s performance since it only includes the restaurants open for more than a year and excludes the effect of currency fluctuation.

b) Operating Margins

Since Dunkin’ Donuts is a near 100% franchised brand, it has very high margins. During the third quarter, Dunkin’ Donuts U.S.’ reported margins stayed relatively stable at 74.7%, up 100 basis points compared to the margins in Q3 2012.

Back in 2012, the company announced it was ready to offer incentives such as reduced fee and royalty to its franchisees in order to fulfill its expansion drive. As a result, there could be some deterioration in the long term margins of the company.

Margins will also depend on the magnitude of the comparable sales growth. The majority of the expenses involved in franchising a restaurant brand are fixed (since Dunkin’ doesn’t have to incur labor, occupancy or raw material costs). Therefore, higher franchisee sales spread out the expenses over a bigger revenue base and widen the overall margins.

c) Store Expansion

In 2013, the company added 790 new stores globally, out of which 371 were Dunkin’ Donuts stores in the U.S. In 2014, the company plans to add another 380-410 stores. The Western part of the U.S. is a major focus area for the company since it has little presence in the region. At the start of 2013, there were only 191 Dunkin’ Donuts stores in the Western half of the country.

The company eventually plans to raise that figure to 5,000 stores, including 1,000 in California. Dunkin’ entered into Denver last year and also signed agreements with franchisees to open nearly 90 stores across states such as California, Utah and Colorado by 2014-2015. Overall, Dunkin’ plans to almost double the number of stores in the U.S. to 15,000 within the next 18-20 years.

See full analysis for Dunkin’ Brands

See More at Trefis | View Interactive S&P Capital IQ Analyses (Powered by Trefis)

Like our charts? Embed them in your own posts using the Trefis WordPress Plugin.

Source: Forbes Business

 
 

Don't miss ...

 

<a href="/latest_stories/all/all/30" rel="author">Forbes</a>
Forbes is among the most trusted resources for the world's business and investment leaders, providing them the uncompromising commentary, concise analysis, relevant tools and real-time reporting they need to succeed at work, profit from investing and have fun with the rewards of winning.

 

blog comments powered by Disqus

Latest stories

Breastfeeding linked to lower risk of postnatal depression
London, Aug 22 (IANS) A new study involving 10,000 mothers has shown that women who breastfed their babies were at significantly lower risk of postnatal depression than those who did not.
 
 
Pakistan media flays India for axing talks
Islamabad, Aug 22 (IANS) Two Pakistani newspapers Friday denounced India's decision to call off talks between their foreign secretaries, saying it had dealt "a serious blow" to the bilateral peace process.
 
 
Novel way to monitor drone's parametres
New York, Aug 22 (IANS) Drones are the future of home delivery and surveillance but to achieve this consistently, they will have to tackle high winds and other uncertainties like depletion of fuel.
 
 
Moon soil charged by electric spark?
Washington, Aug 22 (IANS) High-energy particles from solar storms may have electrically charged the soil in the moon's frigid polar regions, altering its properties, a study suggests.
 
 
 

Latest from the Network

David Walliams has naked picture of Lara Stone at home
David Walliams keeps a saucy picture of Lara Stone on the wall of their mansion. The couple - who married in 2010 - don't have many photographs on the walls of their London home apart from a black and white print of the...
Read more on Celebrity Balla
 
Daniel Radcliffe learning Japanese
London, Aug 22 (IANS) Actor Daniel Radcliffe says he is learning to speak Japanese but is finding it tough. "I just started learning Japanese. It's super hard, but fascinating," femalefirst.co.uk quoted the British...
Read more on Celebrity Balla
 
Rihanna obtains restraining order
Los Angeles, Aug 22 (IANS) Singer Rihanna has obtained a restraining order against a man who was caught eyeing her Hollywood Hills property here last week. The unidentified man was caught hanging around her house for...
Read more on Celebrity Balla
 
Britney Spears 'fed up' of father's control
Los Angeles, Aug 22 (IANS) Singer Britney Spears is allegedly "fed up" of her father Jamie Spears controlling her finances. The 32-year-old's personal and professional affairs have been controlled by Jamie and Andrew...
Read more on Celebrity Balla
 
Taylor Swift 'horrified' to see John Mayer
Los Angeles, Aug 22 (IANS) Country musicianTaylor Swift was shocked to see her former boyfriend John Mayer at the same restaurant. The duo split in 2010 following a brief romance and the 24-year-old apparently didn't...
Read more on Celebrity Balla
 
Breastfeeding linked to lower risk of postnatal depression
London, Aug 22 (IANS) A new study involving 10,000 mothers has shown that women who breastfed their babies were at significantly lower risk of postnatal depression than those who did not. The study, by researchers in...
Read more on Apple Balla
 
Pakistan media flays India for axing talks
Islamabad, Aug 22 (IANS) Two Pakistani newspapers Friday denounced India's decision to call off talks between their foreign secretaries, saying it had dealt "a serious blow" to the bilateral peace process. "The...
Read more on Ad Balla
 
Amy Winehouse sculpture to be unveiled in London
London, Aug 22 (IANS) A sculpture to commemorate Amy Winehouse is to be unveiled at Camden market in north London, near the singer's last home. The memorial, which has been designed by Scott Eaton, will be a life-...
Read more on Celebrity Balla
 
Mariah Carey 'heartbroken' by split from husband?
Los Angeles, Aug 22 (IANS) Singer Mariah Carey is said to be "heartbroken" by her split from husband Nick Cannon. Cannon, the host of "America's Got Talent" has confirmed he and Carey have been living apart "for a few...
Read more on Celebrity Balla