Analysts expect Dunkin’ Brands (DNKN) to post revenues of $329.6 million—a rise of 45.1% from $227.1 million in the same quarter in 2017. The revenue growth could largely be driven by the adoption of the new accounting standard. The new accounting standard mandates the reporting of funds raised from franchisees for marketing under revenues and the addition of the same amount to operating costs, which is expected to increase the company’s revenues during the quarter.
Dunkin’ Brands’ revenues are expected to be driven by an increase in royalty income due to positive SSSG (same-store sales growth), the addition of new restaurants, and growth in its CPG (Consumer Packaged Goods) segment.
By the end of the third quarter, Dunkin’ Brands operated 202 more Dunkin’ Donuts points of distribution and 42 more Baskin-Robbins points of distribution compared to the fourth quarter of 2017. The new points of distribution and the points of distribution opened during the fourth quarter are expected to drive the company’s revenues.
To enhance customers’ experience, Dunkin’ Brands has developed a next-generation restaurant design, which enables faster service. When the company announced its third-quarter earnings, it had 60 new and remodeled next-generation restaurants in the United States. To transform into a “beverage-led, on-the-go brand,” Dunkin’ Brands announced that it would invest $100 million in its US business, which includes 65% of the investment into upgrading equipment.
All of these initiatives along with value offerings, seasonal product innovation, and implementation of technological advancements are expected to drive Dunkin’s SSSG.
In partnership with DoorDash, Baskin-Robbins provides delivery service from 70% of its US stores. The average delivery check size is 50% higher than the average check size at its restaurants. The delivery expansion is expected to drive Baskin-Robbins’s SSSG during the quarter.
Last quarter, Dunkin’ Brands launched a pumpkin spice flavored ready-to-drink iced coffee and “shot in the dark,” which is an espresso-based beverage in partnership with Coke. The new products are expected to drive Dunkin’ Brands’ CPG sales.
For 2018, Dunkin’ Brands’ management expects its revenues to rise by the low to mid-single digits adjusting for the new accounting standard. For the same period, management expects the SSSG in Dunkin’ restaurants in the United States to be 1%. Management expects the SSSG to be in the low-single digits for US Baskin-Robbins restaurants.
Next, we’ll discuss analysts’ EPS expectations.