Dunkin Brands getting a new look!
To increase traffic after the morning rush and to further gain market share from its competitors like Starbucks and McDonald’s, management has come out with a new store design after seven years and now over 70% of the stores are in the newest images.
Krispy Kreme Doughnuts (NYSE:KKD) offers stiff competition…
Krispy Kreme Doughnuts (NYSE:KKD) is undoubtedly the biggest competition to Dunkin’ Brands operating 773 stores in 22 countries. For the latest quarter revenue were up 11% to $120.6 million. What’s impressive is the 11.4% increase in same-stores, continuing the good run through the past 18 quarters. But the same-store sales numbers at international franchise stores were down 7.3%, continuing from the 8.1% fall in the quarter before that. With over 40% of the sales coming from international franchisees, this is a disturbing factor.
The company now expects its earnings per share to be in the range of $0.59-$0.63 from previous outlook of $0.53-$0.57, and the adjusted net income is expected to be between $42 million-$45 million.
Krispy Kreme Doughnuts (NYSE:KKD) P/E of 52.88 makes it much more expensive than Dunkin’ Brands with a P/E of 45.70. Dunkin’ Brands has a profit margin of 15.9%, thrice that of Krispy Kreme Doughnuts (NYSE:KKD)’ 5.08%, and also offers healthy dividend yield of 1.8%, while Krispy Kreme Doughnuts doesn’t give any dividend.
Krispy Kreme Doughnuts’ small market cap of $1.14 billion makes it prone to speculative play evident from its fall from $50 in 2004 to $2 in 2009. Therefore, I’d rather keep away from it knowing it is already up 213% from its 52-week low.
Baskin Robbins
One key product of Dunkin’ Brands which its competitors lack is its 100% franchised specialty ice-cream chain Baskin Robbins, which also happens to be the world’s largest specialty ice cream chain. The brand operated over 7000 stores in nearly 50 countries, and with summer around, the heat may keep some people from sipping hot coffee, but the ice cream segment is surely going to bring in strong revenues.
Management recently came out with an aggressive incentive plan for existing and new franchisees to attract new franchisees and remodel the existing ones to rekindle the spark in the brand. The company plans to open five new units in 2013, 25 in 2014 and 50 in 2015, which is expected to boost revenue by $93,000 in 2014 and $207,000 in 2015.
Impressive growth rate coupled with a healthy dividend
Analysts expect earnings to be in the range of $1.51-$1.55 per share for 2013 and $1.88-$1.73 per share in 2014, which puts the growth rate at an impressive 20% level.
To add a cherry on the cake, Dunkin’ Brands offers a healthy dividend yield of 1.8%. Thus, investors may earn a steady income along with participating in the company that sells their Favorite products!
Foolish takeaway
Dunkin’ Brands has a lot going for it in terms of growth. The foray into the western part of the country will unleash a new life into the brands growth in the coming five years. The new product offerings should continue to attract crowds, while their doughnuts and coffee loyal customers should remain intact. The new store designs will make the ambience all the more attractive to customers who would want to eat more slowly, enjoying the space, rather than eating on the go. And the growing Baskin Robbins chain will further strengthen the company’s portfolio. But with the price being so high, I would recommend to buy a small percentage now and wait for pullbacks to further accumulate the share.
Tushar Agarwal has no position in any stocks mentioned. The Motley Fool recommends Starbucks. The Motley Fool owns shares of Starbucks.
Tushar is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
The article Making Money Sipping Coffee and Dunking Doughnuts originally appeared on Fool.com is written by Tushar Agarwal.
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