Dunkin’ Donuts CEO still confident in turnaround plan

Dunkin’ Donuts CEO remains confident in its three-year plan for taking on the coffee industry but its first-quarter earnings report on Thursday proved it still has a long way to go.

“I know I have been accused of being over confident in the past, and I will take that on the chin,” Dunkin’ CEO Nigel Travis Travis said during the company’s earnings call Thursday.

Travis said that while results in the first quarter were “choppy,” he is pleased with the company’s progress and expects improvement going forward.

In the latest quarter, the company outpaced analysts expectations on the bottom line, helped by a lower tax rate and share repurchases, but revenue was weak and fell below expectations.

In the quarter ended March 31, Dunkin’ said net income rose to $50.2 million, or 57 cents per share, from $44.3 million, or 48 cents a share, a year ago.

Excluding items, the company earned 62 cents a share, which was better than the 53 cents per share analysts were expecting, according to Thomson Reuters.

Total revenue climbed 1.7 percent to $301.3 million, lower than analyst expectations of $303.1 million.

Same-store sales also lagged behind, slipping 0.5 percent compared to the 0.1 percent growth that analysts had expected, according to StreetAccount.

Travis blamed stiff industry competition, particularly when it comes to value promotions, inclement weather during the winter months and the roll out of a simplified menu for the softer-than-expected sales.

The coffee and doughnut chain has been pressured by competitors such as McDonald’s, Burger King and Starbucks, to make itself known for more than just doughnuts.

Dunkin’s strategy, which it laid out during its investor day in February, includes slimming down its menu, increasing speed and convenience and focusing more on its beverages than its food.

Despite the disappointing sales, the company still expects same-store sales to increase 1 percent in 2018, while revenue should climbs at a low- to mid-single-digit pace. It raised its adjusted earnings forecast to a range of between $2.69 and $2.74 per share, up from a prior forecast of $2.40 to $2.45 per share.

The company said there were a few pockets of strength. Dave Hoffmann, president of Dunkin’ Donuts U.S., said that the brand saw record-breaking breakfast sandwich sales and an improvement in traffic during the afternoon, due to special PM beverage offerings.

Hoffmann also said that Dunkin’s partnership with Girl Scout drove sales of its flavored coffee and espresso beverages.

Dunkin shares were up less than 1 percent on Thursday, recovering from a 5 percent premarket drop that came after short-seller Jim Chanos said he is betting against the brand because of its asset-light model, which relies on collecting royalties from franchises.

Tune in: Nigel Travis will appear on CNBC’s “Closing Bell” at 3 pm E.T.

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