Dunkin' Brands (DNKN) was having one of the worst trading days since its July 2011 IPO, at one point falling to a 52-week low, after disappointing investors with unimpressive revenue and a diminished full-year forecast.
In recent trading, the stock was down 4.3% to $42.09. It's only had four sessions in which it fell more.
For the second quarter, earnings of 47 cents a share met analysts' estimates, but revenue, though up 4.6% from the same period a year ago to $190.9 million, was below the $197.5 million consensus forecast on FactSet. Franchisees, who account for nearly the entire Dunkin' system, reported sales of $2.5 billion, a 5.8% increase from last year.
Dunkin', which owns both the Dunkin' Donuts and Baskin-Robbins brands, said Dunkin' Donuts U.S. same-store sales rose 1.8%, though Wall Street was looking for a 3.7% advance, according to FactSet. Dunkin' Donuts' American locations account for about 70% of Dunkin' Brands system revenue.
For the year, Dunkin' Donuts U.S. comparable-store sales growth will probably be 2% to 3%, down from the 3% to 4% that had been expected. Revenue for Dunkin' Brands likely will be up 5% to 7% rather than 6% to 8%, and earnings per share should be $1.73 to $1.77, missing the old outlook of $1.79 to $1.83.
The Canton, Mass-based company said Thursday that Dunkin' Donuts U.S. comp sales were weaker than anticipated because of "macroeconomic challenges facing consumers." It managed to work in a weather excuse, as well, citing "an unseasonably cold, rainy start to the spring season." Still, comparable-store sales improved throughout the quarter, and traffic and average checks were higher.
Dunkin' relies heavily on breakfast for its revenue, and there it competes with a number of companies, including McDonald's (MCD), Starbucks (SBUX) and Krispy Kreme (KKD). The breakfast time of day, when Americans want quick drive-through morning meals, has long been competitive, and new entrants, such as Taco Bell, have bid to take some of the share.
With its doughnuts, coffee and sandwiches, Dunkin's got a sizable part of the market now, and it's adding stores, including in California. Still, it is a crowded arena, and to ever stand as the clear breakfast winner will be extremely difficult considering the level of competition.
After the latest decline in its stock, Dunkin' is now down 13.3% in 2014. Last year, it rose 45.3%, and in 2012, it gained 32.8%. From a valuation perspective, it might start to appear better to traders once they've had time to reset their opinions. Its current price-to-earnings ratio on the next year's expected earnings is 21.5, below its average of 24. In comparison, Starbucks, which will report quarterly results after the close of trading, has a 26.1 forward multiple, while Krispy Kreme has a 19.4.