Dunkin’ Brands Group Inc. (NASDAQ:DNKN)’s U.S. Dunkin’ Donuts Shops Face Challenges

Dunkin’ Brands Group Inc. (NASDAQ:DNKN) announced this Thursday that the sales, at Dunkin’ Donuts coffee shops, this year will be less than expected. The reason for this is that the competition in the market has increased as other fast-food chains have stepped into the breakfast business. Three quarters of the company’s revenue comes from the Dunkin’ Donuts shops in the U.S. On Thursday, the shares of Dunkin’ Brands Group Inc. (NASDAQ:DNKN) fell by 3.5% to a value of $45.15.

McDonald’s Corp. (NASDAQ:MCD) is undoubtedly the top fast-food breakfast provider. When faced with challenges of the competitions, the company responded by introducing promotions including free coffee.

Unfortunately, the fast-food market is not growing significantly and hence it is difficult to expect profit out of the breakfast business. The U.S. economy may be improving but the wages of low-income workers are not increasing. As a result, they avoid spending much money on fast-food. This means that fast-food companies can’t increase the prices of their menu items in order to gain more profit from their businesses.

Chief Financial Officer of Dunkin’ Brands Group Inc. (NASDAQ:DNKN), Paul Carbone, said that it will be a challenge enough for the company to attain the lower end of its sales growth forecast. During July, Dunkin’ Brands Group Inc. (NASDAQ:DNKN) reduced their forecast for the fiscal 2014 because they had to face extreme challenges; the company was getting good enough profit from Baskin-Robbins, the ice cream business. In the face of new competition and increased prices of milk, the profits from the business are reducing.

Even though the company achieved lower sales than expected at the Dunkin’ Donuts coffee shops, Dunkin’ Brands Group Inc. (NASDAQ:DNKN) still managed to achieve as much earnings as forecasted for the current fiscal. The company earned $1.73 to $1.77 per share. Dunkin’ Brands Group Inc. (NASDAQ:DNKN) says that they are well-positioned to face the adversity in the market of coffee commodity.

In the third quarter of the current fiscal, the company earned a profit of $54.7 million, which marks a growth of 36%. The growth rate is higher than expected. After excluding special item costs, the earnings are 49 cents per share. The total revenue generated equaled $192.6 million, which is 3.4% higher than last year’s.

In the third quarter of 2014, sales generated at the Dunkin’ Donuts restaurants in U.S. increased by 2%. This was lower than expected. However, the company performed better than McDonald’s Corp. (NASDAQ:MCD), which fell by 3.3% in terms of sales in the restaurants established in U.S.

Nigel Travis, CEO and Chairman, Dunkin’ Brands Group Inc. (NASDAQ:DNKN), said that the company is growing slowly. The company had targeted on establishing 15,000 coffee shops in the U.S. The CEO increased the target number to 17,000 this year. The company seems to have performed good enough, despite the losses at Dunkin’ Donuts coffee shops. But seeing the potential of the company, it is safe to bet that it will come out of the rough spot easily enough.