* Q2 adjusted net income down slightly to $24.7 million
* Revenue up 4 percent to $157 million
* Shares down 4 percent in midday trading
(Rewrites throughout; adds company comment; changes dateline
to LOS Angeles; updates share activity)
By Lisa Baertlein
LOS ANGELES, Aug 3 Dunkin' Brands Group Inc
(DNKN.O) said on Wednesday its franchisees are raising prices
at Dunkin' Donuts and Baskin-Robbins stores to help cover thehigher costs of key ingredients such as coffee and milk.
The shares of the company, which had its initial public
offering last week, were down 4 percent after it also reported
profits in the most recent quarter were down slightly from a
Dunkin' Donuts franchisees raised some prices during the
second quarter, largely due to the spike in coffee costs, Nigel
Travis, chief executive of Dunkin' Brands and president of
Dunkin' Donuts, said on a conference call.
"However, many of them chose not to raise coffee prices,
but to focus price increases on our more differentiated
products, such as breakfast sandwiches and cold beverages,"
"For Baskin-Robbins, we anticipate ice cream dairy
ingredients will remain at current high levels," he said.
Owners of Baskin-Robbins ice cream shops plan to raise
prices in the third quarter as the parent company also works to
lower commodity costs by taking steps such as using secondary
suppliers and negotiating contracts.
Dunkin' Brands' second-quarter net income slipped to $17.2
million from $17.3 million, a year earlier, while adjusted
profit fell to $24.7 million from $25.6 million.
Revenue rose more than 4 percent to $157 million.
The Canton, Massachusetts-based company said same-store
sales at all of its established U.S. stores were up 3.2 percent
for the quarter.
That included a 3.8 percent rise at Dunkin' Donuts, as
customers spent more per visit, and a 2.8 percent drop at
Baskin-Robbins, where sales were hurt by severe winter
The U.S. Dunkin' Donuts business accounts for the lion's
share of sales at Dunkin' Brands.
Dunkin' Donuts customers rank as the most loyal in the U.S.
coffee segment, ahead of Starbucks Corp (SBUX.O), McDonald's
Corp (MCD.N) and Canadian chain Tim Hortons Inc THI.TO, and
the chain plans to more than double its U.S. outlets from
roughly 6,800 over the next 20 years.
U.S. Dunkin' Donuts stores have begun selling so-called
"K-cups" filled with the brand's coffee for use with Green
Mountain Coffee Roasters Inc's GMCR.O popular Keurig
single-cup brewing machine. That product is expected to boost
The K-cups will be available only at Dunkin' Donuts stores,
Dunkin' Donuts, which sells coffee drinks and food such as
bagels and breakfast sandwiches, also has more than 3,000
Dunkin' Brands made its debut as a publicly traded company
last week and its shares jumped as much as 56 percent in their
first day of trading. [ID:nN1E76Q0LS]
Chief Financial Officer Neil Moses said the company used
most of the proceeds from the IPO to pay down debt.
As a result, Moses said, Dunkin' Brands reduced its debt to
$1.5 billion from $1.88 billion and cut its annual interest
expense by half to around $60 million.
Dunkin' Brands shares, which have traded as high as $31.94
since the IPO, were down $1.13 cents at $26.63 in midday
trading on the Nasdaq.
(Additional reporting by Mihir Dalal and Jochelle Mendonca;
editing by Joyjeet Das and Andre Grenon)