Dunkin’ Brands Blames Weather for Making Its Coffee Sales Go Cold

Source: Thinkstock

Dunkin’ Brands (NASDAQ:DNKN), the parent company of Dunkin’ Donuts and Baskin Robbins, released first-quarter results before trading began on Thursday and reported disappointing figures that sent its stock down 2.3 percent, to $46.50, before the opening bell. Dunkin’ shares closed down 1.8 percent at $46.73 on Thursday and were sitting up 0.42 percent at $46.89 as of 10:45 a.m. Eastern on Friday.

The Canton, Massachusetts-based company blamed the frigid winter weather for its earnings, which fell 3.5 percent to $23 million, missing analysts’ expectations, but company executives maintained confidence that Dunkin’ will be able to compensate for the losses in the future. Nigel Travis, chairman and CEO of Dunkin’ Brands, said in a statement following the earnings release: “We had a difficult first quarter with our comparable store sales growth in the U.S. significantly impacted by severe weather in the regions of the country where most of our Dunkin’ Donuts restaurants are located. However, we remain confident that we will hit our targets for the full year.”

As noted by Travis, Dunkin’s U.S. comparable store sales – a figure considered a good indicator of a company’s health — gained only 1.2 percent in the first quarter of 2014, below analyst expectations, while revenue increased 6.2 percent, to $171.9 million. The company also declared a 23 cent second-quarter dividend. Dunkin’ stuck to its full-year forecast for growth and noted that it expects its new locations across the country to facilitate necessary sales success and perpetuate company growth.

Source: Dunkin’ Brands

Paul Carbone, chief financial officer of Dunkin’ Brands, said: “Our steadfast focus on franchisee profitability is the backbone of our long-term plan to have more than 15,000 Dunkin’ Donuts restaurants in the U.S.. We’re proud to report that the 2013 cohort of new restaurant openings delivered 25 percent cash-on-cash returns to franchisees, the fourth year in a row that new restaurants achieved this target.

“The compelling restaurant returns are driven by strong topline results, increased sales of high-margin beverages and breakfast sandwiches, the move to flat-pricing by our franchisee-owned purchasing and distribution cooperative, highly-effective real-estate selection, and an operations-focused culture and we continue to attract highly-qualified new and existing franchise operators to grow with the Dunkin’ Donuts brand in the U.S.”

Dunkin’ Brands certainly isn’t the first company to blame its disappointing earnings on this winter’s frigid temperatures, as companies like McDonald’s (NYSE:MCD) and  Wal-Mart (NYSE:WMT) have also made similar complaints. But while many rolled their eyes at the donut chain’s excuses, Matthew Spitznagle, a senior research analyst at Eagle Asset Management, defended the company in an interview with USA Today. He said, “I know I’m not in the mood to go buy coffee and doughnuts when the weather is bad.” Other analysts pointed out that cold weather disrupts morning routines when schools are closed, appointments are cancelled, and consumers are home-bound.

Still, Dunkin’s main rival, Starbucks (NASDAQ:SBUX), also released its latest set of earnings on Thursday, and it impressed investors with its revenue figures that met analysts’ expectations, while the company’s executives conspicuously made no mention of the poor weather’s effect on sales. Starbucks’s strong same-store sales and second-quarter revenue of $3.9 billion didn’t exactly make Dunkin’ Brands look good, but it’s also important to remember that Starbucks is more than 10 times the size of Dunkin’. The Massachusetts-based company is still working on expanding its company’s efforts so it can even come close to competing on the same playing field on which Starbucks currently thrives.

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