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Category: Stock Market and Dunkin' Brands
Date: 4 May 2020 Stock Price: $62.03 We take a look at the 1st 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.
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About Dunkin' Brands
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 1st quarter 2020 earnings report
The data below refers to the latest quarter's data (unless specified otherwise)
- Total revenues: $323.144 million (up from $319.091 million for the same quarter of the previous year)
- Total revenues increased by 1.3% over the last 12 months
- Operating expenses: $226.166 million (up from $219.986 million for the same quarter of the previous year)
- Operating expenses increased by 2.8% over the last 12 months
- Some margin squeeze for Dunkin Brands as revenues grew at a slower rate than their operating expenses
- Net income: $52.113 million (down from $52.323 million for the same quarter of the previous year)
- Diluted earnings per share: $0.63 (unchanged from $0.63 for the same quarter of the previous year)
- PE ratio of Dunkin' Brands: 24.6
- Dividend declared: The dividend payout was suspended until further notice due to the impact of Coronavirus
- Dividend yield of Dunkin' Brands: --
- Number of shares in issue: 83.222 million (down from 83.432 million for the same period of the previous year)
- Cash and cash equivalents: $601.226 million
- Cash and cash equivalents per share: $7.22
- Cash and cash equivalents makes up 11.6% of Dunkin' Brands' market capital
- Cash and cash equivalents makes up 15.5% of Dunkin' Brands total assets
- Accounts receivable: $87.676 million
- Accounts receivable makes up 2.3% of Dunkin' Brands total assets
- Goodwill in Dunkin' Brands: $888.253 million
- Goodwill per share: $10.67
- Goodwill makes up 22.9% of Dunkin' Brands total assets
Dunkin' Brands (NASDAQ: DNKN) management commentary on 1st quarter 2020 earnings
Dunkin' Brands Group, Inc. (Nasdaq: DNKN), the parent company of Dunkin' and Baskin-Robbins (BR), today reported results for the first quarter ended March 28, 2020.
"Prior to the crisis, we experienced strong first quarter performance across the system, including Dunkin' U.S. which was on track to have its highest quarterly comps in more than six years and positive traffic," said Dave Hoffmann, Dunkin' Brands Chief Executive Officer. "With the number one priority being the safety of crew members and our guests, early in the crisis we implemented strong safety measures at our restaurants with gloves, masks, and plexiglass shields, and now we are shipping an infrared thermometer to every U.S. restaurant to help monitor crew health. Solidarity with our great franchisees has never been stronger, and as a 100-percent franchised business we are supporting our franchisees and will continue to focus on their overall business health. In addition to the relief we are providing to them, Dunkin' Brands is very grateful for the support from the Federal government to all U.S. small business owners, including many of our franchisees."
Hoffmann continued, "At Dunkin' Brands, we feel an obligation to do our part to keep America working by avoiding any corporate furloughs. Our focus has been to preserve our strong balance sheet by aggressively reducing operating expenses and preserving cash, including suspending our quarterly dividend and share repurchase programs. Simultaneously, our management team and Board of Directors are voluntarily taking salary and fee reductions with the savings generated going to the Dunkin' Brands Family Fund, which supports Dunkin' and Baskin-Robbins crew members in times of crisis. Throughout this pandemic, we have been guided by our corporate values of strong, smart, and kind, which includes striving to do the right thing for our communities."
"Prior to the crisis, we experienced strong first quarter performance across the system, including Dunkin' U.S. which was on track to have its highest quarterly comps in more than six years and positive traffic," said Dave Hoffmann, Dunkin' Brands Chief Executive Officer. "With the number one priority being the safety of crew members and our guests, early in the crisis we implemented strong safety measures at our restaurants with gloves, masks, and plexiglass shields, and now we are shipping an infrared thermometer to every U.S. restaurant to help monitor crew health. Solidarity with our great franchisees has never been stronger, and as a 100-percent franchised business we are supporting our franchisees and will continue to focus on their overall business health. In addition to the relief we are providing to them, Dunkin' Brands is very grateful for the support from the Federal government to all U.S. small business owners, including many of our franchisees."
Hoffmann continued, "At Dunkin' Brands, we feel an obligation to do our part to keep America working by avoiding any corporate furloughs. Our focus has been to preserve our strong balance sheet by aggressively reducing operating expenses and preserving cash, including suspending our quarterly dividend and share repurchase programs. Simultaneously, our management team and Board of Directors are voluntarily taking salary and fee reductions with the savings generated going to the Dunkin' Brands Family Fund, which supports Dunkin' and Baskin-Robbins crew members in times of crisis. Throughout this pandemic, we have been guided by our corporate values of strong, smart, and kind, which includes striving to do the right thing for our communities."
"This morning we announced that our Board of Directors has suspended our regular dividend program, which will result in cash savings of approximately $33 million in the second quarter, and reinforces our already strong balance sheet. We believe a temporary suspension of our dividend and share repurchase program is the prudent and responsible thing to do in this time of unprecedented uncertainty," said Kate Jaspon, Chief Financial Officer, Dunkin' Brands Group, Inc. "Additionally, due to this uncertainty and the impact of COVID-19 on financial and operational results, we are withdrawing both our fiscal 2020 and long-term growth targets."
SEGMENT UPDATES
As a 100-percent franchised business, the Company has taken a series of actions in direct response to the current global pandemic meant to preserve financial flexibility and support its franchisees during this time of uncertainty, including the actions described below.
Draw Down of Revolving Financing Facility
SEGMENT UPDATES
- Dunkin' U.S. average weekly systemwide sales leveled off through the first four weeks of the second fiscal quarter and we have seen small increases week-over-week. At the end of March and into early April, Dunkin' U.S. comparable store sales declined approximately 35%. For the week ending April 25, 2020, this decline for open restaurants was approximately 25%.
- Baskin' U.S. average weekly systemwide sales have increased week-over-week through the first four weeks of the second fiscal quarter. At the end of March and into early April, Baskin U.S. comparable store sales declined approximately 30% to 35%. For the week ending April 25, 2020, this decline for open restaurants was approximately 10%.
- Approximately 90% of Dunkin' U.S. locations remain open as of April 25. The temporary closures have been primarily on college campuses, transportation hubs, and in dense urban areas.
- Our restaurants have been deemed an essential business in many jurisdictions allowing them to remain open in some capacity. Dunkin' U.S. has a flexible operating model where it can often continue to offer drive-thru, delivery, and curbside service where in restaurant dining is not permitted.
- More than 90% of Baskin-Robbins U.S. locations remain open as of April 25.
- Approximately 50% of international restaurants remain open as of April 25, split about equally between brands.
As a 100-percent franchised business, the Company has taken a series of actions in direct response to the current global pandemic meant to preserve financial flexibility and support its franchisees during this time of uncertainty, including the actions described below.
Draw Down of Revolving Financing Facility
- The Company took a precautionary measure in March and borrowed $116 million available under its variable funding notes to ensure access to funds and further strengthen financial flexibility. Including the draw down, the Company had $381 million in unrestricted cash held in the U.S. as of the end of Q1 2020.
- The Company suspended share repurchase activity in March 2020 due to the uncertainty related to COVID-19 and its impact on financial and operational results.
- The Board of Directors has suspended the Company's regular dividend program. The suspension of the dividend program will result in cash savings of approximately $33 million in the second quarter. The Board of Directors remains committed to paying dividends over the long term and expects to reinstitute the program when it is appropriate to do so.
- The Company's CEO, Dave Hoffmann, has voluntarily agreed to take a 30% reduction in base salary along with the senior management team taking a voluntary 20% reduction in base salary. The Board of Directors has voluntarily agreed to take a 50% reduction in cash director fees. The reductions are initially through early August 2020, subject to extension if the situation warrants. The savings from these reductions will be directed to the Dunkin' Brands Family Fund which supports Dunkin' and Baskin-Robbins crew members in times of crisis.
- The Company hosted multiple calls with its franchisee lender banks, reminding them that the Company's franchisees are small business owners and that, in addition to the relief provided by the Company as franchisor, they also need the banks' help. The Company's franchisees have indicated that their banks have been largely supportive to date, with many deferring principal and/or interest payments due from franchisees and also extending letters of credit.
- The Company extended payment terms for royalties and advertising fees (and certain other items) for franchisees in the U.S. and Canada from 12 to 45 days through mid-May to provide them with more financial flexibility to better support their employees and guests. In addition, the Company waived up to one month of rental payments and allowed franchisees to defer two months of rent on the approximately 900 properties leased by the Company to franchisees. The Company does not expect these actions to impact its ability to meet its cash needs or to comply with the covenants under its securitization documents.
- Due to the evolving nature and inherent uncertainty related to the COVID-19 pandemic and its impact on financial and operational results, the Company is withdrawing its fiscal year 2020 targets issued on February 6, 2020 and its long-term targets issued on February 7, 2019.
- During the first quarter, the Company returned $97.4 million to shareholders, including $33.1 million in dividends and $64.3 million through open market repurchases of approximately 881,000 shares. The Company's shares outstanding as of March 28, 2020 were 82,087,373. The last open market repurchase was executed on March 6, 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 $51 a stock and its currently trading at $62.03 a stock. That's a steady return of 21.6% 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 low of $38.51 than it is to its 52 week high of $84.74 a stock, which to us is an indication that the short term sentiment and momentum of Dunkin' Brands stock is slightly negative
The stock of Dunkin' Brands is trading at a little closer to its 52 week low of $38.51 than it is to its 52 week high of $84.74 a stock, which to us is an indication that the short term sentiment and momentum of Dunkin' Brands stock is slightly negative
Recent Google search trends DNKN stock price
The graphic below, from Google Trends shows the trend in Google searches for DNKN stock price over the last 12 months in the United States. As it shows its not a very frequently searched topic on Google.
Recent coverage of Dunkin' Brands
The extract below discusses the latest regarding Dunkin' Brands as obtained from TheStreet.com
Dunkin' Brands (DNKN) posted first-quarter results that beat analysts’ forecasts as the donut and coffee fast-food chain managed to continue pumping out the coffee and donuts amid the coronavirus pandemic and subsequent economic shutdown - though registered a steep drop-off in sales in the final three weeks of the quarter.
The Canton, Mass.-based company said it earned $52.1 million, or 67 cents an adjusted share, vs. $52.3 million, or 67 cents a share, in the comparable year-ago quarter. Analysts polled by FactSet had been expecting earnings of 62 cents. Sales rang in at $323.1 million vs. $321.9 million a year ago. Analysts had been expecting sales more in the range of $310.6 million. Comparable same-store sales, a key metric among retail and restaurant chains, fell 2%, though Dunkin’ noted that the same figure was a positive 3.5% in the first 10 weeks of the quarter before the pandemic prompted large-scale shutdowns across the U.S.
On the Baskin-Robbins ice-cream side of the business, comparable- store sales gained 1.8% in the first quarter as an increase in average ticket was partially offset by a decrease in traffic, also concentrated in the final three weeks of the quarter, Dunkin' said.
Read the full article here
Dunkin' Brands (DNKN) posted first-quarter results that beat analysts’ forecasts as the donut and coffee fast-food chain managed to continue pumping out the coffee and donuts amid the coronavirus pandemic and subsequent economic shutdown - though registered a steep drop-off in sales in the final three weeks of the quarter.
The Canton, Mass.-based company said it earned $52.1 million, or 67 cents an adjusted share, vs. $52.3 million, or 67 cents a share, in the comparable year-ago quarter. Analysts polled by FactSet had been expecting earnings of 62 cents. Sales rang in at $323.1 million vs. $321.9 million a year ago. Analysts had been expecting sales more in the range of $310.6 million. Comparable same-store sales, a key metric among retail and restaurant chains, fell 2%, though Dunkin’ noted that the same figure was a positive 3.5% in the first 10 weeks of the quarter before the pandemic prompted large-scale shutdowns across the U.S.
On the Baskin-Robbins ice-cream side of the business, comparable- store sales gained 1.8% in the first quarter as an increase in average ticket was partially offset by a decrease in traffic, also concentrated in the final three weeks of the quarter, Dunkin' said.
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 1st quarter 2020 earnings and the fact that the group withdrew their fiscal guidance for their 2020 fiscal year? Based on Dunkin' Brands earnings report our valuation models provides a target price (full value price) of Dunkin' Brands at $49.60 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 $49.60 therefore we believe a good entry point into Dunkin' Brands stock is at $44.60 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 $49.60 therefore we believe a good entry point into Dunkin' Brands stock is at $44.60 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 2nd quarter 2020 earnings report in early August 2020