LOS ANGELES (Reuters) - Dunkin’ Brands Group Inc (DNKN.O) reported quarterly profit on Tuesday that exceeded analyst estimates as revenue came in stronger than expected amid a bitter fast-food price war, but shares fell amid indications of a weak start in January.
The Canton, Massachusetts-based owner of Dunkin’ Donuts, like fast-food giant McDonald’s Corp (MCD.N), is using low-priced “value” deals to lure consumers in a breakfast market crowded with competitors ranging from Starbucks Corp (SBUX.O) to convenience stores.
Shares in Dunkin’ Brands, which also owns the Baskin-Robbins ice cream shop brand, were down 1.1 percent at $60.20 in midday trading.
Executives signaled a January traffic slowdown due to cold, snowy weather and said the company and its franchisees faced pressures from “value wars” and a tighter labor market.
“This leads us to believe Q1 has started off soft for Dunkin’,” Nomura analyst Mark Kalinowski said in a client note.
The comments from Dunkin’ came after Starbucks reported a tepid start to the current quarter, and suggest that January same-store sales results for U.S. chain restaurants were weak, Kalinowski said.
Dunkin’ said fourth-quarter net income more than tripled to $195.5 million, or $2.13 per share. Excluding the benefit from a new U.S. tax law, it earned 64 cents a share in the quarter.
Dunkin’ Brands expects its 2018 effective tax rate to be about 28 percent, against 38.5 percent in 2017, Chief Executive Nigel Travis said on a conference call with analysts.
Total sales climbed 5.3 percent to $227.1 million in the quarter, on higher franchise fees and the first gain in same-store sales by all four Dunkin’ Brands business segments in nearly three years.
Analysts, on average, had expected quarterly earnings of 63 cents a share on revenue of $220.6 million, according to Thomson Reuters I/B/E/S.
Same-store sales at U.S. Dunkin’ Donuts restaurants, which account for roughly 70 percent of overall revenue, rose 0.8 percent, matching analysts’ estimate.
McDonald’s last week reported a 4.5 percent rise in U.S. sales at established restaurants and has ramped up pressure on rivals with the launch of its $1, $2, $3 value menu, which includes breakfast items, in early January. [L4N1PP4SA]
Dunkin’ Donuts had a 2 for $5 breakfast sandwich promotion in the fourth quarter and a $2 food and drink promotion in January.
The chain, like Starbucks, has struggled to lure more customers in the afternoon, which some analysts attribute to McDonald’s more aggressive pricing.
Reporting by Lisa Baertlein in Los Angeles; Editing by Bernadette Baum