Dunkin' Donuts U.S. store sales fall as competition heats up

(Reuters) - Dunkin' Brands Group Inc DNKN.O reported a surprise drop in quarterly sales at established U.S. Dunkin' Donuts restaurants as the launch of all-day breakfast by McDonald's Corp MCD.N and value-meal offers by rivals lured customers away.

People stand in line outside a newly opened Dunkin' Donuts store in Santa Monica, California September 2, 2014. REUTERS/Mario Anzuoni

Dunkin’ also said its plans to boost sales would take time to show results and it would continue to be impacted in 2016 by the “value price war” sparked by McDonald’s all-day breakfast.

“It has obviously become very competitive so you have to believe there was some impact on us,” Dunkin’ Chief Executive Nigel Travis said on a conference call.

Dunkin’ Donuts will introduce more premium espresso-based drinks such as Macchiatos to boost sales, Travis said.

The chain also plans to bring new food items and beverages faster to market, and offer more value items on its menu.

Sales at stores open for at least 18 months fell 0.8 percent in the fourth quarter ended Dec. 26, compared with a year earlier, a performance termed “disappointing” by Travis.

Analysts polled by research firm Consensus Metrix were expecting sales to increase by 0.8 percent.

The company’s Dunkin’ Donuts outlets in the United States account for about three quarters of its total revenue.

Dunkin’ Brands reported a net loss attributable to the company of $8.9 million, or 10 cents per share, in the quarter, compared with a profit of $52.5 million, or 50 cents per share, in the same quarter of 2014.

The company said it took a $54.3 million impairment charge related to its Japanese joint venture.

Excluding items, the company earned 52 cents per share, above analysts’ average estimate of 50 cents, according to Thomson Reuters I/B/E/S.

Revenue rose 5.5 percent to $203.8 million, in line with the average analyst estimate of $203.3 million.

The company forecast 2016 Dunkin’ Donuts U.S. comparable store sales to grow by up to 2 percent and Baskin-Robbins’ to rise by 1-3 percent.

The company’s shares were down 1 percent at $40.46 in early trading on Thursday on the Nasdaq.

Reporting by Sruthi Ramakrishnan in Bengaluru, Editing by Anil D’Silva