UPDATE 3-Dunkin' Donuts profit doubles, signs California deals
July 25 (Reuters) - Dunkin' Donuts avoided the summer swoon that hit many of its U.S. fast-food rivals and reported second-quarter earnings that grew more than Wall Street expected on Thursday, as customers bought more of it higher-priced sandwiches.
The coffee and doughnut chain also announced long-awaited deals for 45 new cafes in Southern California that will mark its official return to the nation's most populous state after more than a decade.
Tax hikes, persistently high unemployment and other consumer pressures weighed on many quick-service hamburger, pizza and sandwich chains in the last month of the second quarter.
For example, Dunkin' rival McDonald's Corp on Monday turned in a surprise 0.2 percent drop in U.S. sales at established restaurants for June and a softer-than-estimated 1 percent increase for the second quarter.
In contrast, Dunkin' Donuts reported a stronger-than-expected same-store sales rise of 4 percent for the latest quarter after customers visited more often and spent more money per trip for the duration of the three-month period.
"Our traffic is up and people are trading up to more expensive sandwiches," Nigel Travis, chief executive of Dunkin' Brands Group Inc, told Reuters.
Shares in Dunkin' Brands, which have gained roughly 25 percent during the last year, slipped 2.6 percent on Thursday as some investors took profits.
"Investors are taking some money off the table given the broad-based weakness in the (restaurant) space," said Telsey Advisory Group analyst Peter Saleh.
Earlier this week, investors also sold shares in Domino's Pizza after it reported quarterly results that topped Wall Street's target.
Starbucks Corp, the world's biggest coffee chain, reports results after the market close and results from Dunkin' Donuts could bode well for that iconic, but more upscale brand.
Dunkin' Donuts left California in August 2002 and fans there have been clamoring for it to return.
It now plans to open its first stand-alone cafes in Southern California in 2015. Some "non-traditional" Dunkin' Donuts shops - such as those in military bases, fueling centers, colleges, casinos or airports - may debut in the next several months.
In May 2012 Dunkin' Donuts opened on a U.S. Marine base near San Diego, but access to that cafe is limited.
The first of the new "non-traditional" cafes is slated for a travel center on historic Route 66 in Barstow, California, executives said.
Dunkin' Donuts plans to have up to 200 stores in California by 2020 and has a long-term plan to have more than 15,000 restaurants in the United States. McDonald's now has more than 14,000 U.S. restaurants, while Starbucks is closing in on 13,000.
In the near-term, however, much of Dunkin's growth will be east of the Mississippi river, Travis said.
Parent Dunkin' Brands, which also owns the Baskin-Robbins ice cream brand, said second-quarter net income more than doubled to $40.8 million, or 38 cents per share.
On an adjusted basis, the company earned 41 cents per share, a penny better than analysts' average estimate, according to Thomson Reuters I/B/E/S.
Dunkin' shares were down $1.12 to $40.88 in midday trading on the Nasdaq.