Dunkin' Donuts Announces 100 Store Closures as Sales Slow
Shares of Dunkin' Donuts (Nasdaq:DNKN) fell more than 12 percent after the Canton, Massachusetts-based coffee chain announced the closure of 100 stores amid lower-than-projected EPS and a slowdown in same-store sales and customer traffic.
Executives said 2015 revenue is still set to increase 6-8%, creating $1.87-$1.91 EPS. That missed the $1.92 mark analysts expected.
Management said same-store sales came in at a soft 1.1%, at the low end of the projected 1-3% growth. According to Citi Analyst Gregory Badishkanian, the “190bps offset by a traffic decline of approximately 70bps.” In addition, customer traffic declined 0.7 percent during the fiscal year.
Executives blamed several factors for that SSS miss besides low traffic, including a continued decline in K-Cup sales, too few products on the new menu lineup and a lack of promotions including eggs due to the avian flu outbreak. They also said new pricing increases might have been too aggressive for customers.
As for the store closures, 100 locations are set to shut down as convenience store chain Speedway LLC plans to exit locations with Dunkin’ Donuts outlets.
Executives spoke a lot about new menu items, including a wider range of espresso options and jumping onto the pumpkin spice bandwagon. They also touted a new mobile ordering platform set for 2016 and the launch of Apple pay; which will be available at the beginning of 2016. Dunkin’ will also be testing delivery in the Dallas market in Q4.
Executives saw potential for more than 30,000 stores in the future, including nearly 9,000 more stores in the U.S.
Despite all the technology and experiments that get investors buying other brands and the rosy view of the future, the numbers reflect a distinct slowdown for the chain of more than 19,095 stores worldwide.
Coupled with a hurricane tracking for the East Coast, Q4 could be rough for the company. The company had to shut down more than 2,000 stores temporarily during Hurricane Sandy.
The brand releases full third quarter earnings on October 22.