Up for a trip to Dunkin' Coffee Co.?
Armed with new research that says people are digging its pricier new cold brew and macchiato coffees, Dunkin' Brands Group (DNKN) will now place significant focus in the year ahead on rolling out and marketing innovative new coffees and other beverages.
The natural response to that maneuver, which was divulged on an earnings call with analysts Thursday, is what about the future of Dunkin's donut and sandwich platforms? After all, the 66-year old Boston-based fast food chain does food way better than rival Starbucks (SBUX) and most convenience stores, which ultimately gives them a leg up.
"The bombshell may be that we made our mind up and we are going to follow beverages, which will make us much more successful in the future, and more competitive against other coffee chains convenience chains. Just to be absolutely clear, we are not giving up on sandwiches -- we are not going to suddenly disappear from food," Dunkin' Brands Group Chairman and CEO Nigel Travis told TheStreet in an interview.
Dunkin's decision to go after beverages, which tend to have higher profit margins compared to food, more aggressively certainly paid off in the form of better-than-expected third-quarter earnings.
The operator of Dunkin' Donuts and Baskin-Robbins saw earnings rise 15.4% from the prior year to 60 cents a share, surpassing Wall Street estimates of 58 cents. Net sales came in a bit light, falling 1.3% from a year ago to $207.1 million. Analysts anticipated $214.8 million.
Despite consumers continuing to eat at home amid falling prices at grocery stores, the Dunkin' Donuts chain had a bounce-back quarter. Same-store sales rose 2%, beating estimates for a 1.3% increase. In the second quarter, the coffee and donut chain's sales rose a meager 0.5%. Travis gave a shout out to strong sales of coffee, an area where he has led a push into pricier lattes and iced coffee drinks such as cold brew.
"Our Dunkin' Donuts U.S. business delivered solid comps for the quarter, fueled by record-breaking beverage sales, with double-digit growth in the espresso and iced coffee categories," said Travis, adding that "breakfast sandwiches grew because we focused on beverages."
