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Dunkin’ Brands Reiterates 2017 Guidance despite Weak 1Q17 Sales

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Part 3
Dunkin’ Brands Reiterates 2017 Guidance despite Weak 1Q17 Sales PART 3 OF 9

Dunkin’ Donuts: Same-Store Sales Growth Lower Than Estimates

Same-store sales growth

SSSG (same-store sales growth), which is expressed in percentages, measures the rise in revenue from existing restaurants over a certain period of time. SSSG is driven by ticket size and traffic.

Dunkin&#8217; Donuts: Same-Store Sales Growth Lower Than Estimates

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1Q17 performance

In 1Q17, SSSG for Dunkin’ Donuts, which operates under the umbrella of Dunkin’ Brands (DNKN), was flat in the United States. The increase in ticket size was offset by less traffic. The company blamed colder weather in March 2017 in the Northeast markets for the fall in traffic, claiming that it lowered the segment’s SSSG by 0.60%.

The rise in ticket size contributed 3.0% to SSSG, which includes a positive mix less discounting year-over-year and increased menu prices. Higher menu prices contributed 2.0% to SSSG.

During the quarter, SSSG was driven by breakfast sandwich sales, iced coffee sales, and more DD Perks memberships. Value messaging drove breakfast sandwich sales. By the end of 1Q17, DD Perks had 6.5 million members and represented 10.0% of sales for Dunkin’ Donuts U.S.

Moving to the Dunkin’ Donuts International segment, SSSG was -0.20%. Strong sales in Asia, the Middle East, and South America were offset by declining sales in South Korea.

Peer comparisons

In 1Q17, Starbucks (SBUX) and Panera Bread (PNRA) posted SSSG of 3.0% and 2.6%, respectively.

Outlook

For 2017, Dunkin Brands’ management has maintained its SSSG guidance in the low single digits. SSSG is expected to be driven by menu innovations and simplifications, enhancement of customer experience, and marketing and promotional initiatives.

The company is partnering with Waze to develop a real-time, crowd-sourced traffic and navigation app (application). This initiative, the launch of a new frozen coffee, and the remodeling of old restaurants are expected to drive Dunkin’ Donuts’ SSSG in 2017.

In the next part of this series, we’ll take a look at SSSG in 1Q17 for Baskin-Robbins.

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