Who has time to wait in line for their morning java fix? Dunkin Brands — the operator of the Dunkin’ Donuts stores — says it is trying to distinguish itself from rivals like Starbucks and McDonald’s as the ultimate destination for “on-the-go” beverages and food as its targets modest sales growth this year.
The company’s shares were up nearly 5 per cent on Thursday — and poised for their best day in a year — after the company announced quarterly earnings for the three-month period ending December 31 that came in better than expected on most counts. Earnings per share were 64 cents for the quarter, compared to the 61 cents forecast by analysts surveyed by Bloomberg, on net income of $56.1m, versus analysts’ predictions of $53m profit. Revenue came in as expected at $215.7m.
Same-store sales at its core Dunkin’ Donuts stores were slightly softer than expected, improving 1.9 per cent versus expectations of a 2 per cent rise. Its Baskin-Robbins stores fared less well, with declining traffic pushing same-store sales to a loss of 0.9 per cent, compared with expectations of a 0.7 per cent decline.
Dunkin said that it is guiding for low single-digit comparable sales growth for both brands this year, and low-to-mid single-digit revenue growth.
At the core of its growth strategy will be to push its “on-the-go” offerings to help position it as the more convenient and affordable option in the competitive market for morning beverages, Dunkin executives said in a call with analysts after the earnings report.
“The brand positioning of the beverage-led On-The-Go brand is clear, progressive and forward-leaning,” said David Hoffmann, president of Dunkin’ Donuts US and Canada who joined the company late last year after more than two decades with McDonald’s.
For instance, it is hoping to ramp up the number of customers who use its mobile ordering, which has been available for just about six months. The ability to order before arriving at the restaurant and breeze past the line is “a huge unlock,” said chief digital officer Scott Hudler – and something that coffee competitor Starbucks is already taking advantage of.
Dunkin is also eyeing a streamlined menu, in order to make food faster, and has begun testing out curbside delivery at some stores in Massachusetts, designed to be a speedier alternative to drive-through windows – a test it plans to expand in 2017 as franchisees clamour for that option.
One perk to being the on-the-go choice? Restaurants may gradually require less space, said Dunkin Brands chief executive Nigel Travis, adding, “I think ultimately, we will require less capital investment because we’ll need less space for people to sit inside the store.”