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Dunkin' Donuts' "squishy" quarter reason for concern

The words “oil” and “crude” don’t appear anywhere in Dunkin’ Donut’s Q4 earnings press release. The coffee and donut slinger reported what Yahoo Finance’s Jeff Macke calls a “squishy” quarter that included comparable sales that grew less than 2%. The company’s press release celebrates “growing transactions in the Dunkin' Donuts U.S. business in the face of macroeconomic and competitive headwinds”

A drink and a doughnut are seen at a Dunkin' Donuts location in the Chicago suburb of Niles, Illinois, February 4, 2015. REUTERS/Jim Young

“This just in,” Macke says, “You sell sugar and caffeine to motorists in America. The price of gas fell 50%, you can’t sell sugar and donuts, are you kidding me Dunkin’ Donuts?”

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The problem, says Lee Munson of Portfolio, LLC, is that as American’s find a little extra cash in their pockets after paying at the pump, they are looking to spend it at a higher end establishments, at least higher compared to Dunkin’ Donuts.

“They’re not paying [that extra money] at Dunkin’s Donuts, they want to go to Starbucks,” he contends, adding McDonald’s is suffering from the same problem.

“When we have our next bear market Dunkin’ Donuts is gonna be the little darling even though I question the management at this time.”

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Even with dismal sales, Dunkin' did raise its quarterly dividend by 15%. Munson would like to see more companies do the same while energy prices are low. That way, he argues, when energy prices inevitably pop sometime down the road management can roll those payouts back.

As for Dunkin' Donuts, Munson says, “If you can’t make money now there’s something really wrong."

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