CANTON, Mass., US – Dunkin’ Brands Group, Inc., the parent company of Dunkin’ Donuts (DD) and Baskin-Robbins (BR), today reported results for the third quarter ended September 28, 2013.
Global systemwide sales growth in the third quarter was primarily attributable to global store development and Dunkin’ Donuts U.S. comparable store sales growth (which includes stores open 54 weeks or more).
Dunkin’ Donuts U.S. comparable store sales growth in the third quarter was driven by increased average ticket and higher traffic resulting from our continued product and marketing innovation. This includes strong beverage growth, led by cold beverages and hot and iced espresso driven by the continuation of Iced Coffee flavors inspired by Baskin-Robbins Ice Cream as well as the introduction of Caramel and the return of Pumpkin across the beverage portfolio; continued breakfast sandwich momentum highlighted by the limited time offer Hot & Spicy Breakfast Sandwich and incremental gains in the Turkey Sausage Breakfast Sandwich; growth in donut sales led by the introduction of Lemonade, Key Lime and Pumpkin Pie flavors as well as bulk offers in select markets; and growth in afternoon products including the limited time offer Pretzel Roll Roast Beef
Sandwich and incremental gains in Chicken and Tuna Salad Wraps and Chicken Sandwiches.
Baskin-Robbins U.S. comparable store sales growth was driven by sales of Cups, Cones and Beverages led by news around Flavors of the Month, OREO® n’ Chocolate and OREO® Nutty Salted Caramel; increased sales of cakes; and take-home ice cream quarts.
In the third quarter, Dunkin’ Brands franchisees and licensees opened 222 net new restaurants around the globe. This includes 81 net new Dunkin’ Donuts U.S. locations, 73 net new Baskin-Robbins International locations, 67 net new Dunkin’ Donuts International locations, and one net new Baskin-Robbins U.S. location. Additionally, Dunkin’ Donuts U.S. franchisees remodeled 98 restaurants during the quarter.
Revenues for the third quarter increased 8.5 percent compared to the prior year primarily from increased royalty income due to the increase in systemwide sales, increased franchise fees due to favorable development mix and incremental franchise renewals, and increased sales of ice cream products.
Operating income for the third quarter increased $11.9 million, or 16.9 percent, from the prior year primarily as a result of the increases in royalty income and franchise fees, as well as the impact of the additional depreciation and costs incurred in the prior year related to the closure of our ice cream manufacturing plant in Canada.
The increases were offset by $3.7 million in write-downs related to our investments in the Dunkin’ Donuts Spain joint venture. Adjusted operating income increased $3.9 million, or 4.6 percent, from the third quarter of 2012 as a result of the increases in royalty income and franchise fees, offset by the write-downs related to the Spain joint venture and incremental general and administrative costs.
Net income for the third quarter increased by $10.7 million, or 36.2 percent, compared to the prior year primarily as a result of the $11.9 million increase in operating income as well as the $4.0 million loss on debt extinguishment and refinancing transactions incurred in the third quarter of 2012, offset by a $4.5 million increase in income tax expense and a $0.9 million increase in interest expense.
Adjusted net income increased by $2.4 million, or 5.6 percent, compared to the third quarter of 2012, as a result of the increase in adjusted operating income, offset by increases in interest expense and income tax expense.
Diluted adjusted earnings per share increased by 10.8 percent to $0.41 for the third quarter of 2013, as a result of the increase in adjusted net income, as well as a decline in shares outstanding due to the repurchase of 15 million shares in August 2012 and approximately 400,000 shares repurchased under previous authorizations during 2013.
Dunkin’ Donuts U.S. revenues of $134.3 million represented an increase of 8.6 percent year-over-year. The increase in revenue was primarily a result of increased royalty income, as well as increased franchise fees due to favorable development mix and incremental franchise renewals.
Dunkin’ Donuts U.S. segment profit in the third quarter increased $9.2 million over the prior year to $100.3 million. This increase was driven primarily by revenue growth, partially offset by increased personnel costs related to continued investments in our Dunkin’ Donuts U.S. contiguous growth strategy.
