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Category: Stock Market and Dunkin' Brands
Date: 3 August 2020 Stock Price of Dunkin' Brands: $67.81 We take a look at the 2nd quarter earnings report of their 2020 fiscal year of Dunkin' Brands, the owner of Dunkin' donuts and Baskin-Robbins. Same store sales suffered as a result of the coronavirus. Revenues declined by -20% for the quarter and earnings declined by -38% compared to the same quarter of the previous year.
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About Dunkin' Brands (DNKN)
With more than 21,000 points of distribution in more than 60 countries, Dunkin’ Brands is one of the world’s leading franchisors of quick service restaurants (QSRs) serving hot and cold coffee and baked goods, as well as hard serve ice cream. Dunkin’ Brands is the parent company of two of the world’s most recognized and beloved brands: Dunkin’, America’s favorite all-day, everyday stop for coffee and baked goods, and Baskin-Robbins, the world’s largest chain of ice cream specialty shops.
Dunkin’, founded in Quincy, Massachusetts in 1950, is famous for its combination of high-quality coffees, espresso beverages, baked goods and breakfast sandwiches served all day with fast, friendly service. Baskin-Robbins, founded in Glendale, California in 1945, is iconic for its variety of “31 flavors” of ice cream, along with the brand’s creative ice cream cakes, milkshakes and ice cream sundaes. Dunkin' Brands' 100 percent franchised business model currently includes more than 12,900 Dunkin' restaurants and more than 8,000 Baskin-Robbins restaurants.
Dunkin’ Brands believes being a good corporate citizen is good business. We set corporate social responsibility (CSR) goals to make continuous progress in the areas of sustainable sourcing, packaging, energy efficiency, waste reduction, nutrition, Diversity & Inclusion and other material issues. Additionally, on an annual basis, our franchisees around the world volunteer their time and donate product and funds to countless non-profit groups. Most notably through the Joy In Childhood (JiCF) Foundation, Dunkin’ and Baskin-Robbins franchisees provide joy to kids when they most need it.
Dunkin’, founded in Quincy, Massachusetts in 1950, is famous for its combination of high-quality coffees, espresso beverages, baked goods and breakfast sandwiches served all day with fast, friendly service. Baskin-Robbins, founded in Glendale, California in 1945, is iconic for its variety of “31 flavors” of ice cream, along with the brand’s creative ice cream cakes, milkshakes and ice cream sundaes. Dunkin' Brands' 100 percent franchised business model currently includes more than 12,900 Dunkin' restaurants and more than 8,000 Baskin-Robbins restaurants.
Dunkin’ Brands believes being a good corporate citizen is good business. We set corporate social responsibility (CSR) goals to make continuous progress in the areas of sustainable sourcing, packaging, energy efficiency, waste reduction, nutrition, Diversity & Inclusion and other material issues. Additionally, on an annual basis, our franchisees around the world volunteer their time and donate product and funds to countless non-profit groups. Most notably through the Joy In Childhood (JiCF) Foundation, Dunkin’ and Baskin-Robbins franchisees provide joy to kids when they most need it.
Overview of Dunkin' Brands 2nd quarter 2020 earnings report
The data below refers to the latest quarter's data (unless specified otherwise)
- Total revenues: $287.376 million (down from $359.337 million for the same quarter of the previous year)
- Total revenues decreased by -20.2% over the last 12 months
- Operating expenses: $210.204 million (down from $241.937 million for the same quarter of the previous year)
- Operating expenses decreased by -13.1% over the last 12 months
- Some margin squeeze for Dunkin Brands as revenues fall at a faster rate than their operating expenses
- Net income: $36.450 million (down from $59.622 million for the same quarter of the previous year)
- Diluted earnings per share: $0.44 (down from $0.71 for the same quarter of the previous year)
- PE ratio of Dunkin' Brands: 38.5
- Dividend declared: $0.4025
- Dividend yield of Dunkin' Brands: 2.4%
- Number of shares in issue: 82.6 million (down from 83.7 million for the same period of the previous year)
- Cash and cash equivalents: $515.817 million
- Cash and cash equivalents per share: $6.24
- Cash and cash equivalents makes up 9.2% of Dunkin' Brands' market capital
- Cash and cash equivalents makes up 13.5% of Dunkin' Brands total assets
- Accounts receivable: $113.232 million
- Accounts receivable makes up 2.9% of Dunkin' Brands total assets
- Goodwill in Dunkin' Brands: $888.263 million
- Goodwill per share: $10.75
- Goodwill makes up 23.2% of Dunkin' Brands total assets
Dunkin' Brands (NASDAQ: DNKN) management commentary on 2nd quarter 2020 earnings
Dunkin' Brands Group, Inc. (Nasdaq: DNKN), the parent company of Dunkin' and Baskin-Robbins (BR), today reported results for the second quarter ended June 27, 2020.
"For Dunkin' U.S., same store sales improved sequentially throughout the quarter, largely as a result of our ability to pivot quickly and introduce new menu items designed to appeal to customers who are now visiting us later in the day. Our digital platform -- a cornerstone of our Dunkin' Blueprint for Growth -- drove significant customer engagement and rapid recovery during the quarter, and last week we announced the hiring of a Chief Digital & Strategy Officer to accelerate our digital future," said Dave Hoffmann, Chief Executive Officer, Dunkin' Brands Group, Inc. "We are extremely proud of our great franchisees who kept the vast majority of our restaurants open during the quarter and really stepped up with a sense of urgency and grit to keep their team members employed, our guests served, and their communities running."
"For Dunkin' U.S., same store sales improved sequentially throughout the quarter, largely as a result of our ability to pivot quickly and introduce new menu items designed to appeal to customers who are now visiting us later in the day. Our digital platform -- a cornerstone of our Dunkin' Blueprint for Growth -- drove significant customer engagement and rapid recovery during the quarter, and last week we announced the hiring of a Chief Digital & Strategy Officer to accelerate our digital future," said Dave Hoffmann, Chief Executive Officer, Dunkin' Brands Group, Inc. "We are extremely proud of our great franchisees who kept the vast majority of our restaurants open during the quarter and really stepped up with a sense of urgency and grit to keep their team members employed, our guests served, and their communities running."
"This morning we announced that our Board of Directors has reinstated our dividend program, and authorized and declared a quarterly dividend for the third quarter. The reinstatement of our dividend reflects the overall financial health of Dunkin' Brands and our commitment to shareholders," said Kate Jaspon, Chief Financial Officer, Dunkin' Brands Group, Inc. "In addition, the Company repaid all of its borrowings under its variable funding notes during the second quarter and ended the quarter with a strong cash balance to provide ongoing financial flexibility. Given the strength and stability of our franchised model, coupled with our franchisees' ongoing business recovery, we remain confident in our ability to maintain appropriate liquidity through the current crisis."
Global systemwide sales decline of 20.8% in the second quarter was primarily attributable to global comparable store sales declines and permanent and temporary restaurant closures as a result of the global COVID-19 pandemic. The pandemic had an unfavorable impact on systemwide sales for each of our segments in the second quarter.
Dunkin' U.S. comparable store sales declined 18.7% in the second quarter as a decline in traffic driven by the COVID-19 pandemic was partially offset by an increase in average ticket. The increase in average ticket was driven by favorable mix shift to family-size bulk orders and snacking attachment, as well as premium priced cold beverages, espresso, and other specialty beverages, and partially offset by increased discounting driven by both national and local value platforms. Comparable store sales improved sequentially in each month of the second quarter. Comparable store sales would have been approximately 480 basis points lower if temporarily closed restaurants were included.
Baskin-Robbins U.S. comparable store sales declined 6.0% in the second quarter as a decline in traffic driven by the COVID-19 pandemic was partially offset by an increase in average ticket. The increase in average ticket was driven by strength of take home products, specifically ice cream quarts and cakes. Comparable store sales improved sequentially in each month of the second quarter.
In the second quarter, Dunkin' Brands franchisees and licensees had net closures of 229 restaurants globally. This included net closures of 40 Dunkin' U.S. locations (inclusive of the closure of 10 Speedway locations), 7 Baskin-Robbins U.S. locations, 2 Dunkin' International locations, and 180 Baskin-Robbins International locations primarily driven by Japan, Russia, and India. Dunkin' U.S. franchisees remodeled 34 restaurants and Baskin-Robbins U.S. franchisees remodeled 12 restaurants during the quarter.
Revenues for the second quarter decreased $72.0 million, or 20.0%, compared to the prior year period due primarily to decreases in royalty income and advertising fees driven by a decline in systemwide sales, primarily for the Dunkin' U.S. segment. Royalty income for the second quarter also reflects a reduction of revenue of approximately $8 million related to corporate financial relief provided to franchisees most significantly impacted by the pandemic. Also contributing to the decrease in revenues was a decrease in rental income as the second quarter reflects the impact of rent waivers being provided to our franchisees of approximately $3 million and a decline in variable rental income due to the decline in systemwide sales, as well as a decrease in sales of ice cream and other products.
SEGMENT UPDATES
Dunkin' U.S.
COMPANY UPDATES
Liquidity and Use of Cash
As of the end of Q2 2020, the Company had approximately:
Global systemwide sales decline of 20.8% in the second quarter was primarily attributable to global comparable store sales declines and permanent and temporary restaurant closures as a result of the global COVID-19 pandemic. The pandemic had an unfavorable impact on systemwide sales for each of our segments in the second quarter.
Dunkin' U.S. comparable store sales declined 18.7% in the second quarter as a decline in traffic driven by the COVID-19 pandemic was partially offset by an increase in average ticket. The increase in average ticket was driven by favorable mix shift to family-size bulk orders and snacking attachment, as well as premium priced cold beverages, espresso, and other specialty beverages, and partially offset by increased discounting driven by both national and local value platforms. Comparable store sales improved sequentially in each month of the second quarter. Comparable store sales would have been approximately 480 basis points lower if temporarily closed restaurants were included.
Baskin-Robbins U.S. comparable store sales declined 6.0% in the second quarter as a decline in traffic driven by the COVID-19 pandemic was partially offset by an increase in average ticket. The increase in average ticket was driven by strength of take home products, specifically ice cream quarts and cakes. Comparable store sales improved sequentially in each month of the second quarter.
In the second quarter, Dunkin' Brands franchisees and licensees had net closures of 229 restaurants globally. This included net closures of 40 Dunkin' U.S. locations (inclusive of the closure of 10 Speedway locations), 7 Baskin-Robbins U.S. locations, 2 Dunkin' International locations, and 180 Baskin-Robbins International locations primarily driven by Japan, Russia, and India. Dunkin' U.S. franchisees remodeled 34 restaurants and Baskin-Robbins U.S. franchisees remodeled 12 restaurants during the quarter.
Revenues for the second quarter decreased $72.0 million, or 20.0%, compared to the prior year period due primarily to decreases in royalty income and advertising fees driven by a decline in systemwide sales, primarily for the Dunkin' U.S. segment. Royalty income for the second quarter also reflects a reduction of revenue of approximately $8 million related to corporate financial relief provided to franchisees most significantly impacted by the pandemic. Also contributing to the decrease in revenues was a decrease in rental income as the second quarter reflects the impact of rent waivers being provided to our franchisees of approximately $3 million and a decline in variable rental income due to the decline in systemwide sales, as well as a decrease in sales of ice cream and other products.
SEGMENT UPDATES
Dunkin' U.S.
- Dunkin' U.S. comparable store sales have been improving week-over-week during the beginning of the third quarter. As of the week ended July 25, 2020, quarter-to-date comparable store sales declines were low-single digits for open stores.
- Approximately 96% of Dunkin' U.S. locations were open as of July 25. The majority of the locations that remain closed are in transportation hubs, on college campuses, in sports venues, and other alternative points of distribution.
- The Company expects that approximately 800 Dunkin' U.S. locations, including the previously announced 450 limited-menu Speedway locations, may permanently close in 2020 on a gross basis as part of a real estate portfolio rationalization, being performed in conjunction with its franchisees, with the goal of setting the U.S. system up for continued strong, profitable future growth. The 800 locations would represent approximately 8 percent of the Dunkin' U.S. total restaurant footprint and approximately 2 percent of 2019 Dunkin' U.S. systemwide sales, inclusive of the Speedway closings.
- As of the week ended July 25, 2020, Baskin-Robbins U.S. quarter-to-date comparable store sales declines were low-single digits for open stores.
- Approximately 98% of Baskin-Robbins U.S. locations were open as of July 25. The majority of the locations that remain closed are non-traditional locations.
- Approximately 90% of each of Dunkin' and Baskin-Robbins International locations were open as of July 25.
- The Company expects that approximately 350 restaurants may permanently close on a gross basis internationally in the second half of 2020. Similar to the closures in the U.S., the majority of these closures are expected to be from low-volume sales locations.
COMPANY UPDATES
Liquidity and Use of Cash
As of the end of Q2 2020, the Company had approximately:
- $291 million of unrestricted cash held in the U.S., which excludes cash reserved for gift cards and advertising funds; and
- $117 million of available borrowings under its $150 million variable funding notes, providing ongoing financial flexibility. As previously disclosed, given the market uncertainty arising from the COVID-19 pandemic, the Company took a precautionary measure and borrowed approximately $116 million under its variable funding notes during the first quarter of 2020. The Company repaid all of these borrowings during the second quarter of 2020.
- The Company today announced that the Board of Directors reinstated its dividend program and declared a cash dividend of $0.4025 per share, payable on September 9, 2020, to shareholders of record as of the close of business on September 1, 2020.
- The Company's shares outstanding as of June 27, 2020 were 82,257,776. In order to preserve cash in light of the ongoing COVID-19 pandemic, the Company did not repurchase any shares during the second quarter of 2020.
Dunkin' Brands (NASDAQ: DNKN) stock price history
The image below obtained from Google, shows the stock price history of Dunkin' Brands over the last 5 years. And its been a very good time for Dunkin' Brands stockholders. 5 years ago the stock of Dunkin' Brands was trading at around $53.50 a stock and its currently trading at $67.81 a stock. That's a steady return of 26.7% provided to Dunkin' Brands stockholders over the last 5 years.
The stock of Dunkin' Brands is trading at a little closer to its 52 week high than it is to its 52 week low, which to us is an indication that the short term sentiment and momentum of Dunkin Brands (DNKN) stock is positive at this point in time.
The stock of Dunkin' Brands is trading at a little closer to its 52 week high than it is to its 52 week low, which to us is an indication that the short term sentiment and momentum of Dunkin Brands (DNKN) stock is positive at this point in time.
Dunkin' Brands (DNKN) stock vs Starbucks (SBUX) stock over the last 5 years
The image below shows the stock price performance of Dunkin' Brands (DNKN) and Starbucks (SBUX) over the last 5 years. Both firms are active in the coffee and ready to eat snacks and foods industry. The summary below shows the stock price returns of Dunkin' and Starbucks over the last 5 years.
- Dunkin Brands (DNKN): 35.3%
- Starbucks (SBUX): 38.6%
Recent coverage of Dunkin' Brands
The extract below discusses the latest regarding Dunkin' Brands as obtained from Fool.com
While America didn't run away from Dunkin' Brands (NASDAQ:DNKN) during the pandemic, they weren't exactly fueling up on its coffee and donuts either. Sales fell 20% in the second quarter to $287 million while profits got cut in half, tumbling to $36 million, or $0.44 per share, compared to $72 million, or $0.71 per share, last year. Even adjusting for non-recurring items only boosted it to $0.49 per share, which still missed expectations by a penny. The donut shop did beat on the top line, though, and management announced it would restore the dividend it suspended back in April.
Shifting to the new normal
Dunkin' should have easily taken advantage of the tumult the pandemic caused in the restaurant industry as 90% of its business was takeout before COVID-19. In restaurants with drive-thru windows, 95% of their sales come through that channel. Yet with non-essential businesses closed during the COVID-19 outbreak, the breakfast daypart traffic that also looms large in Dunkin' Brands' operations evaporated. Consumers didn't need to be out traveling in the morning anymore to get the coffee and donuts.
Read the full article here
While America didn't run away from Dunkin' Brands (NASDAQ:DNKN) during the pandemic, they weren't exactly fueling up on its coffee and donuts either. Sales fell 20% in the second quarter to $287 million while profits got cut in half, tumbling to $36 million, or $0.44 per share, compared to $72 million, or $0.71 per share, last year. Even adjusting for non-recurring items only boosted it to $0.49 per share, which still missed expectations by a penny. The donut shop did beat on the top line, though, and management announced it would restore the dividend it suspended back in April.
Shifting to the new normal
Dunkin' should have easily taken advantage of the tumult the pandemic caused in the restaurant industry as 90% of its business was takeout before COVID-19. In restaurants with drive-thru windows, 95% of their sales come through that channel. Yet with non-essential businesses closed during the COVID-19 outbreak, the breakfast daypart traffic that also looms large in Dunkin' Brands' operations evaporated. Consumers didn't need to be out traveling in the morning anymore to get the coffee and donuts.
Read the full article here
Dunkin' Brands (NASDAQ: DNKN) stock valuation
So what do we value Dunkin' Brands stock at after the release of their 2nd quarter 2020 earnings report? Based on Dunkin' Brands earnings report our valuation models provides a target price (full value price) of Dunkin' Brands at $46.10 a stock. We therefore believe that the stock of Dunkin' Brands is overvalued.
We usually suggest that long term and fundamental investors get in at least 10% below our target (full value) price which in this case is $46.10 therefore we believe a good entry point into Dunkin' Brands stock is at $41.50 or below. We expect the stock of Dunkin' Brands to pull back from current levels to levels closer to our target price (full value price) in coming weeks and moths as we believe it is significantly overvalued at this point in time.
We therefore rate Dunkin' Brands as a sell
We usually suggest that long term and fundamental investors get in at least 10% below our target (full value) price which in this case is $46.10 therefore we believe a good entry point into Dunkin' Brands stock is at $41.50 or below. We expect the stock of Dunkin' Brands to pull back from current levels to levels closer to our target price (full value price) in coming weeks and moths as we believe it is significantly overvalued at this point in time.
We therefore rate Dunkin' Brands as a sell
Next earnings release of Dunkin' Brands
It is expected that Dunkin' Brands will publish their 3rd quarter 2020 earnings report in late October 2020