Being from the North East I have a certain level of expertise regarding Dunkin’ Donuts. However, 99% of the time I think about them it’s while I’m ordering a coffee half asleep before work or while struggling to get a breakfast sandwich to cure a vicious hangover. So let’s see how my knowledge of which coffee flavors are swirls vs shots helps to break down their Q3 earnings call.
First off the call starts swimmingly with the Dunkin’ executive team losing power in their building and being forced to take the call on someone’s cell phone and just passing it around the room. Missed EPS by $0.2 and revenue grew by 8.2% or $9 mil. Looks ok on the surface, but most of that growth was from new stores. Same store growth was only up 0.6% with that red headed step child Baskin Robins driving negative 0.4%.
Some of the major things coming out of the call
Simplify The Menu….THANK GOD. Call me a traditionalist, but I like Dunkin’ Donuts for my shitty bagels, solidly mediocre breakfast sandwiches and flavored coffee. Now their menu includes things like a Chicken Bacon sandwich, Ham and Cheddar Ciabata and Tuna Salad Sandwich. Stop chasing waterfalls guys, if I wanted a big menu with actual food I’d go literally anywhere else.
Continue Investing In Digital… Totally on board with this. I was a skeptic when they first rolled out order on the go, mostly because the commercials of the woman in the wing suit sucked. Now I won’t order any other way. There is no better (read: privileged) feeling than walking into a Dunks with a 30 person line, grabbing your order and bouncing. Also I’ve seen that digital ordering alleviates most of the language barrier agita that occurs when dealing with another human.
Lack Of Labor Is A Challenge, according to the Dunkin CEO on this CNBC interview…I’ve gota a solution to this and it’s sitting right under their nose. I am certain that every Dunks has 1-2 homeless regulars either hanging out right in front or chilling inside. No matter where you go, All Day. Every Day. Take a Dunkin Donuts uniform, slap it on these guys and poof problem solved…Also you get rid of the homeless people sitting out front so kind of a 2 birds 1 scone situation here.
All in all, not a bad quarter for Dunks and just based on the pure number of people who are Dunks junkies in Boston, I’m putting a buy rating on their stock.