(Adds CEO comment, byline)
By Lisa Baertlein
July 24 Dunkin' Brands Group Inc cut
its 2014 outlook on Thursday as its U.S. doughnut shops battled
fast-food rivals like McDonald's Corp and high milk
prices softened profits from its international Baskin-Robbins
ice cream business.
Shares of the company, which also reported disappointing
second-quarter sales at its established U.S. Dunkin' Donuts
franchises, dropped nearly 5 percent in morning trading.
The company also cited weakness in its Baskin-Robbins joint
venture in Japan for the reduction in its 2014 forecast.
Dunkin' Brands now expects earnings of $1.73 to $1.77 per
share, excluding special items, for this year. Its prior
forecast called for $1.79 to $1.83.
The company said it expected sales growth of 5 percent to 7
percent, down from previous expectations of 6 percent to 8
U.S. Dunkin' Donuts shops account for roughly three-quarters
of the Canton, Massachusetts-based company's overall revenue. It
lowered its 2014 same-store sales growth target for those stores
to 2 percent to 3 percent from 3 percent to 4 percent
Sales at established Dunkin' Donuts franchises in the United
States rose 1.8 percent in the second quarter. Analysts polled
by Consensus Metrix had expected a 3.3 percent increase.
Executives blamed a cold and rainy start to the spring
season, coupled with rampant discounting by fast-food chains.
McDonald's, Dunkin' Donuts' chief competitor, on Tuesday
said sales at its established U.S. restaurants fell a
steeper-than-expected 1.5 percent in the second quarter.
The world's biggest hamburger chain gave away free coffee
during the quarter to defend its dominance in the U.S. fast-food
breakfast market from existing competitors and new entrants such
as Yum Brands Inc's Taco Bell chain.
"It's a bit of a fistfight," said Dunkin' Brands Chief
Executive Officer Nigel Travis, who forecast a continued brawl
for market share in the popular coffee and breakfast businesses.
Commodity pressures, however, could ease in the second half.
In particular, experts expect global milk prices to decline as
increased supplies come to market.
Dunkin Brands' total second-quarter revenue rose 4.6 percent
to $190.9 million, below the analysts' average estimate of
$198.5 million, according to Thomson Reuters I/B/E/S.
Net income attributable to Dunkin' Brands rose 13 percent to
$46.2 million, or 43 cents per share.
Excluding amortization and other charges, earnings were 47
cents per share, in line with analysts' estimates.
Shares of Dunkin' Brands were down 4.9 percent at $41.80 on
(Additional reporting by Shailaja Sharma in Bangalore; Editing
by Savio D'Souza, Sriraj Kalluvila, Meredith Mazzilli and Lisa