Dunkin' Brands 3Q profit rises, sales growth slows

CANTON, Mass. -- Dunkin' Brands nearly quadrupled its net income during the third quarter as the company trimmed expenses enough to offset slowing sales growth at its Dunkin' Donuts and Baskin-Robbins stores.

The company raised its full-year adjusted earnings expectations, but lowered its revenue guidance.

Dunkin' earned $29.5 million for the three months ended Sept. 29, compared with $7.4 million a year ago. On a per-share basis, profit was 26 cents per share, up from a loss of $1.01 per share last year. The loss stemmed from an accounting adjustment related to its initial public offering of stock last July.

Excluding impairment charges and other items, earnings were 37 cents per share.

Analysts polled by FactSet expected earnings of 35 cents per share.

The current quarter's interest expense declined from a year earlier, while its loss on debt extinguishment and refinancing transactions dropped to $4 million from $18.1 million. Total operating costs and expenses fell to $110.1 million from $116.8 million.

Revenue increased 5 percent to $171.7 million from $163.5 million on higher royalty income, more company-owned restaurants and better system-wide sales. Wall Street forecast higher revenue of $173.9 million.

System-wide sales climbed 4.7 percent in the quarter, but this was a slowdown from the 8.9 percent rise a year earlier.

Revenue for Dunkin' Donuts shops open 54 weeks or longer rose 2.8 percent for U.S. stores on increased traffic and customers spending more per receipt, on average. But growth slowed from the 6 percent rise in the prior-year period. Revenue increased 2.1 percent for international locations.

Growth was slower in the U.S., climbing 1.1 percent at Baskin-Robbins, which was down from 1.7 percent a year earlier. It rose 3 percent overseas.

Tracking shops open 54 weeks or longer is important to retailer because that excludes the volatility from stores recently opened or closed.

Dunkin' Donuts saw strong sales of cold drinks and breakfast sandwiches and improving sales for bakery sandwiches and it single-serve coffee for home use.

Dunkin' Brands expects adjusted earnings of $1.25 to $1.27 per share for the year, better than an earlier projection of $1.22 to $1.25 per share. Revenue is now anticipated to rise 6 percent to 7 percent, compared with a prior forecast for a 7 percent to 8 percent increase.

Analysts predict earnings of $1.27 per share.

In addition, the chain now foresees revenue from U.S. Dunkin' Donuts shops open 54 weeks or longer will come in at the low-end of its outlook for a 4 percent to 5 percent increase. For U.S. Baskin-Robbins locations, results are now expected to climb about 3 percent, in the middle of its prior 2 percent to 4 percent range.

The company's board also declared a fourth-quarter dividend of 15 cents per share. The dividend will be paid on Nov. 14 to shareholders of record on Nov. 5.

Dunkin' Brands Group Inc., based in The Canton, Mass., had more than 10,000 Dunkin' Donuts shops and almost 7,000 Baskin-Robbins locations at the third quarter's end.