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July, 2012

Dunkin' Brands CEO Travis: What Consumer Slowdown? We Haven't Seen It

Dunkin' Brands continues to grow domestically and internationally as the company celebrates its one-year anniversary as a public company. CEO Nigel Travis told Forbes they are uniquely positioned within the sector, with a greater exposure to the U.S. than its rivals and the opportunity to grow despite a slowing economy.

“A consumer slowdown in the U.S? We haven’t seen it,” said Dunkin Brands’ CEO Travis, after the company posted earningswhich revealed U.S. comparable store sales growth of 4% for Dunkin’ Donuts and 4.6% for Baskin Robbins.

While competitors like Starbucks and Yum Brands look to China for growth, Dunkin’ is doing it at home.  In the second quarter, the company delivered a 63.2% increased in adjusted net income to $40.3 million, or 33 cents in a per share basis (in line with analysts’ expectations).

The stock tanked on Thursday, though, falling more than 6% at one point.  Travis wasn’t intimidated, calling it a “great opportunity for people” to buy the stock.  The company is running an “asset-light model” in which they focus on providing marketing and back office support to franchisees, who drive the brand’s growth.

Franchisee sales for Dunkin’ Donuts in the U.S. grew 7.6% to $1.6 billion in the second quarter, despite a slowing economy and a drop in personal consumption.  “They are having near-record profits,” Travis told Forbes, adding that as the economy slows, “people are trading down,” increasing average ticket and traffic at their stores.

Dunkin’ also shut down a plant in Ontario, Canada that supplied ice cream to the brand’s international markets, ending in-house production and moving it to Dean Foods’ facilities.  Travis believes profitability could improve by $4 to $5 million a year.

While they don’t disclose their international performance by country, Travis assured Forbes that their operations in China were going strong: “there has been no impact of the slowdown,” he said.  Acknowledging the troubles in Europe, he did say they expect a good performance, contrasting with McDonald’s’ weakness in their biggest market.  Dunkin’ did face a slowdown in Japan, but he still believes their market segment won’t be “too impacted” by the cooling global economy.

Since coming public in late-July 2011, the stock has gained more than 8%, despite Thursday’s declines.  Travis, who doesn’t focus on the stock price, believes they delivered a solid quarter, and have a strong story to continue growing.  “My job is only half done,” he said.

Source: Forbes
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