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Dunkin’ Brands trims 2015 forecast

Dunkin’ Brands trims 2015 forecast

Company points to consumer pressure, weak packaged coffee sales

The parent of Dunkin’ Donuts and Baskin-Robbins on Thursday downgraded its guidance for 2015, citing macroeconomic pressures on consumers and declining sales of packaged coffee as trends that will continue into the new year and affect sales.

Canton, Mass.-based Dunkin’ Brands Group Inc. projected that same-store sales will rise between 1 percent and 3 percent for the primary Dunkin’ Donuts brand in the U.S. in 2015. That compares with earlier 2015 projections of a 2-percent to 4-percent increase in same-store sales for the brand.

The company expects same-store sales for its Baskin-Robbins chain to rise between 1 percent and 3 percent next year.

Dunkin’ expects overall revenue growth of between 5 percent and 7 percent next year, compared with earlier projections of an increase between 6 percent to 8 percent.

The company also expects Dunkin’ Donuts same-store sales for 2014 to disappoint, likely rising 1.4 percent in the U.S. for the full fiscal year, compared with earlier projections of a 2-percent to 3-percent increase. The fourth quarter and full fiscal year results are scheduled for release on Feb. 5.

“This has been a challenging year for our businesses,” said Nigel Travis, chair and chief executive of Dunkin’ Brands, in a statement. “We are pleased that Dunkin’ Donuts’ 2014 U.S. comparable store sales and transactions remain positive, although not as positive as we hoped because of continued pressure on the consumer and decelerating sales of packaged coffee in our restaurants. We expect those trends to continue into next year.”

In October, Dunkin’ Brands officials had warned they might struggle to meet same-store sales targets for next year after reporting a less-than-expected 2 percent increase in same-store sales for the primary coffee-and-donut brand in the September-ended third quarter.

On the upside, however, Dunkin’ Donuts is expecting to finish 2014 with close to 410 new units open, the top end of its development target for the year.

Next year in the U.S., Dunkin’ Donuts will add an expected 410 to 440 net new restaurants, and Baskin-Robbins U.S. will add between five and 10 net new units, the company said. Two hundred to 300 net new restaurants are projected across the two brands internationally.

The company is not backing off its long-term projections of more than 17,000 potential Dunkin’ Donuts across the U.S., and more than 30,000 units for both brands globally.

Travis said the company is still working on retooling the businesses internationally, but joint ventures in Korea and Japan remain under pressure, which he said would negatively impact results next year.

Still, Travis said, “We are committed to returning to double-digit growth in the subsequent years.”

For the full year 2014, earnings per share are expected to be between $1.75 and $1.76, the company said. Next year, adjusted earnings per share are projected to be between $1.88 to $1.91.

Wall Street analysts expressed disappointment with the dampened projections in reports released Thursday.

David Tarantino, associate director of research at Baird Equity Research, said Dunkin’ Donuts’ challenges in the U.S. could also likely be blamed on heightened competition and weak K-cup sales. Easier comparisons in upcoming quarters may help, he noted, as well as the possible tailwind from improving macro conditions helped by lower gas prices.

Mark Kalinowski, managing director, restaurants at Janney Capital Markets, said Dunkin’ Donuts has strong long-term growth prospects as the mostly East Coast brand moves west of the Mississippi River. Coffee concepts also tend to have high-frequency customers.

Baskin-Robbins, however, may see a significant competitive threat with the rise of self-serve frozen yogurt concepts, he noted.

While improved same-store sales are expected for the fourth quarter across the industry, Kalinowski added, “This is further evidence that this is not a ‘rising tide lifting all boats’ type of situation.”

Dunkin’ Brands mostly franchises more than 11,000 Dunkin’ Donuts and 7,400 Baskin-Robbins locations around the world.

Contact Lisa Jennings at [email protected].
Follow her on Twitter: @livetodineout

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