Dunkin' Brands: Hitting 2014 Sales Goals Won't Be Easy

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This story originally appeared on Reuters

Dunkin' Brands Group Inc reported a better-than-expected quarterly profit, helped by a rise in sales at its Dunkin' Donuts chain in the United States, its largest market.

Sales at established Dunkin' Donuts franchisees in the United States rose 2 percent in the third quarter ended Sept. 27, helped by growing sales of beverages and add-ons like hash browns and breakfast sandwiches.

Analysts polled by Consensus Metrix had expected a 2.3 percent rise for those stores in the same period.

Overall U.S Dunkin' Donuts sales rose 6.5 percent, helped by an increase in the number of outlets and higher royalty fees from the renewal of contracts with existing franchisees.

U.S. Dunkin' Donuts shops account for roughly three-quarters of the company's total revenue.

The company, which also owns the Baskin-Robbins ice cream chain, said achieving the low-end of the 2014 U.S. comparable store sales growth target of 2-3 percent for its Dunkin' Donuts business would be a challenge due to growing competition and "ongoing challenges with the economy".

The Canton, Massachusetts-based company cut its 2014 outlook in July as its doughnut shops battled increased competition from fast-food rivals such as McDonald's Corp and high milk prices ate into profits in its Baskin-Robbins business.

McDonald's, Dunkin's top rival in the United States, said earlier this week sales at restaurants open at least 13 months, fell 3.3 percent in the domestic market.

Starbucks Corp, the world's biggest coffee chain, is scheduled to report results next week.

Dunkin' said net income attributable to Dunkin Brands rose to $54.7 million, or 52 cents per share, in the third quarter, from $40.2 million, or 37 cents per share, a year earlier.

Excluding items, earnings were 49 cents per share.

Total revenue rose 3.4 percent to $192.6 million.

Analysts on average had expected a profit of 47 cents per share on revenue of $196.9 million, according to Thomson Reuters I/B/E/S.

The company's shares closed at $46.79 on the Nasdaq on Wednesday. Up to Wednesday's close, the stock had fallen nearly 3 percent this year, while McDonald's had lost 6 percent of its value.  

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