Dunkin' sales slow as breakfast competition intensifies; profit misses expectations

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CANTON, Massachusetts — Dunkin' Brands Group saw its sales growth slow in the fourth quarter as it faced intensifying competition for on-the-go customers in the mornings.

The company said U.S. sales for Dunkin' Donuts edged up 1.4 percent in the period, down from the growth of 3.5 percent a year ago. The slowdown comes as competitors have pushed into the breakfast category, a relative bright spot in the fast-food industry. On Wednesday, for instance, Yum Brands said Taco Bell's quarterly sales rose 7 percent at established U.S. locations, boosted by its national breakfast launch.

"If you think about it, everyone's getting into the breakfast space," said Dunkin' CEO Nigel Travis in a phone interview.

Travis said Dunkin' Brands, which also owns Baskin-Robbins, was hurt by the financial pressures weighing on its lower- and middle-income customers as well. Other problems over the past year were self-inflicted; he noted, for instance, that Dunkin' relied too heavily on limited-time offers, rather than bigger ideas that have the potential to lift sales over the long term.

Moving forward, Travis pointed to the Croissant Donut the company introduced in November as an example of a "platform" it will look toward for stronger performance. The company plans to announce the baked good hybrid will become a permanent menu item, as well as offering it in different flavors, such as with chocolate filling, as limited-time offers.

The concoction is similar to the popular "Cronut" offered by a New York City bakery.

Additionally, Travis said Dunkin' recently began collecting more specific data about purchases to better tailor its marketing. For example, he said the company might be able to tell whether people more likely to order a doughnut with their lattes, instead of bagels.

Overseas, Dunkin' Donuts sales edged up 0.3 percent. Its Baskin-Robbins chain saw sales increase 9.3 percent in the U.S., while the international division saw a decline of 2.2 percent.

For the period ended Dec. 27, Dunkin' Brands earned $52.5 million, or 50 cents per share. Excluding one-time items, it earned 46 cents per share. That was a penny short of Wall Street expectations, according to Zacks Investment Research.

Total revenue was $193.2 million, topping the $190 million analysts expected. Its shares rose almost 2 percent to $47.43.

Dunkin' expects full-year earnings in 2015 in the range of $1.83 to $1.87 per share. That's down from the $1.88 to $1.91 per share it forecast in December.

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