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Dunkin' CEO disappointed in earnings but sees silver lining

Dunkin' Brands CEO Nigel Travis is disappointed in the company's earnings miss, but told CNBC there was a silver lining in the numbers.

Dunkin' Brands reported weaker-than-expected U.S. quarterly same-restaurant sales, due in part to a cold and rainy start to the spring season, and cut its full-year adjusted profit and sales forecasts.

It also warned that full-year U.S. comparable sales growth at Dunkin' Donuts restaurants are likely to be lower than its forecast.

"We're disappointed we missed. It doesn't hit our normal high standards," Travis said in an interview with "Closing Bell."

"But I think what was important about the quarter is despite the disappointments, we saw some very good news—we grew our transactions and we grew it in an industry that seems to have stagnated."

A customer enters a Dunkin' Donuts store in midtown Manhattan in New York.
Getty Images
A customer enters a Dunkin' Donuts store in midtown Manhattan in New York.

Although the weather was not a major part of the reason for the miss, Travis said it did have an impact.

"This is a business that is based on ritual. If people are disrupted by let's say very high storms or rain, they don't get out of the car, they don't stop off at the drive through, that disrupts their normal pattern," he noted.

Shares dropped 5 percent in premarket trade following the report. (Click here to track its shares.)

Dunkin' Brands, which also owns Baskin-Robbins, said it now expects U.S. comparable-store sales to grow 2 to 3 percent, compared with 3 to 4 percent it forecast earlier.

Dunkin is struggling to woo customers amid higher competition from fast-casual restaurants such as Chipotle Mexican Grill and Panera Bread, as well as from McDonald's in the breakfast category.

"Second-quarter sales growth was below our expectations with Dunkin' Donuts U.S. comparable store sales not accelerating as fast or to the degree that we anticipated," Chief Executive Nigel Travis said in a statement.

Sales at established Dunkin' Donuts franchises in the United States rose 1.8 percent in the second quarter, missing the 3.3 percent increase analysts had expected, according to research firm Consensus Metrix.

McDonald's, the world's biggest hamburger chain, said on Tuesday that sales at established U.S. restaurants fell 1.5 percent in the second quarter.

According to Reuters, Dunkin' Brands cut its full-year adjusted earnings forecast to $1.73 to $1.77 per share on revenue growth of 5 percent to 7 percent. It had earlier estimated earnings of $1.79 to $1.83 per share on sales growth of 6 percent to 8 percent.

The company also blamed weak performance of the Baskin-Robbins joint venture in Japan and lower-than-anticipated profit from Baskin-Robbins international business for the forecast cut.

The company's net income attributable to Dunkin' Brands rose 13 percent, to $46.2 million, or 43 cents per share, in the quarter ended June 28.

Excluding items, Dunkin' Brands earned 47 cents per share, in line with the average analyst estimate, according to Thomson Reuters I/B/E/S.

Total revenue rose 4.6 percent, to $190.9 million, below the average estimate of $198.5 million.

—By CNBC Staff. Reuters contributed to this report.

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