Milling & Baking News - January 6, 2015 - 14

Financial Results

Promotional incentives prove
successful at Krispy Kreme
WINSTON-SALEM, N.C. - Effective limited-time offerings, including
pumpkin-themed Flavors of Fall and
two marshmallow-inspired creamfilled donuts inspired by the "Ghostbusters" movie, contributed to an
increase in third-quarter earnings at
Krispy Kreme Doughnuts, Inc.
Net income in the quarter ended
Nov. 2 was $8,106,000, equal to 12c
per share on the common stock, up
20% from $6,780,000, or 10c per share,
in the same period a year ago. Revenues rose 8% to $122,871,000 from
$114,231,000.
"Our deliberate and strategic use of
promotional incentives and a higher
level of marketing spend proved successful in growing our top line," Tony
Thompson, president and chief executive officer, said in a Dec. 9 conference
call with analysts. "Now that we have
regained traffic momentum, in the
fourth quarter we are looking to balance top-line growth with improved
shop operating margins."
In the wholesale channel, sales
increased nearly 7% to $40,187,000
from $37,680,000. Mr. Thompson said
Krispy Kreme's long-term goal is to

increase the percentage of sales comprised of longer shelf life products.
"We took another step in that direction when we recently introduced
Krispy Kreme apple Danishes and
raspberry Danishes," he said. "These

products are individually packaged
and are a great pairing with Krispy
Kreme coffee that can be brewed at
home or work."
Speaking of coffee, Mr. Thompson
said the company is prioritizing leveraging the Krispy Kreme brand into enhancing its coffee and specialty drink
platforms so that beverages play a
larger role in sales mix.
"While we are determined to increase the frequency of donut purchases, there is also a significant

Dunkin' Brands lowers financial
expectations for 2015
CANTON, MASS. - Dunkin' Brands
Group, Inc. on Dec. 18 provided new
or updated performance expectations
for 2015, several of which are below
the company's long-term earnings
targets. Dunkin' Brands cited slower
sales of packaged coffee in restaurants
and pressure on joint ventures in Korea and Japan as reasons for the lower
expectations.
Dunkin' Brands in 2015 expects
U.S. comparable store sales growth
of 1% to 3% for both Dunkin' Donuts
and Baskin-Robbins. Long-term targets are in the 2% to 4% range. Also
in 2015, Dunkin' Brands expects
revenue growth of between 5% and
7%, which compares to a long-term
target of between 6% and 8%, and
adjusted operating income growth
of between 6% and 8%, which compares to a long-term target of between 10% and 12%.
"This has been a challenging year
for our businesses," said Nigel Travis,
chairman and chief executive officer
14 / January 6, 2015

Milling & Baking News

of Canton-based Dunkin' Brands
Group. "We are pleased that Dunkin'
Donuts' 2014 U.S. comparable store
sales and transactions remained positive, although not as positive as we
hoped because of continued pressure
on the consumer and decelerating
sales of packaged coffee in our restaurants. We expect these trends to continue into next year.
"Internationally we are making
progress in retooling our businesses,
but the joint ventures in Korea and
Japan remain under pressure and are
expected to negatively impact next
year's results. Given this, we are updating and providing additional performance expectations for fiscal year
2015, and while our earnings growth
expectations for 2015 are below our
longer term targets, we are committed
to returning to double-digit growth in
the subsequent years."
In other 2015 projections, the company expects Dunkin' Donuts U.S.
will add between 410 and 440 net

opportunity to increase the beverage attachment rate for consumers
visiting our shops," he said. "Our
research suggests that Krispy Kreme
coffee and other beverages need to
have a higher top-of-mind consumer
awareness, so we are taking steps to
achieve that."
To help drive beverage opportunities both inside and outside Krispy
Kreme shops, Mr. Thompson said the
company has hired Amy Harp as vicepresident of global beverage strategy.
Ms. Harp most recently was global
head of digital brand at illycaffe S.p.A.,
a global coffee company. Earlier in her
career she spent time at PepsiCo, Inc.
as senior manager of new business
marketing and new products.
Mr. Thompson, who took the helm
at Krispy Kreme on June 1, said the
biggest surprise in his first six months
on the job has been the fact the company does as much or more business
after 2 p.m. as it does before 2 p.m.
"So if you are thinking of us mainly
in the context of battling for consumers at breakfast, you should think more
broadly," he said. "Consumer demand
for Krispy Kreme is not limited to any
specific day part, and I believe that is
a big advantage, in a competitive environment that is heavily focused on
breakfast." MBN
new restaurants and that Baskin'
Robbins U.S. will add between 5 and
10 net new restaurants. Internationally, Dunkin' Brands in 2015 will
target opening 200 to 300 net new
restaurants across both its brands.
Globally, Dunkin' Brands expects to
open between 615 and 750 net new
units.
Dunkin' Brands will report results
for the fourth quarter and fiscal year
of 2014 on Feb. 5, 2015. Mr. Travis said
in 2014 Dunkin' Brands expects adjusted earnings per share in the range
of $1.75 to $1.76 and full-year Dunkin'
Donuts U.S. comparable stores sales
growth to be about 1.4%.
"Additionally, we expect to finish the year near the top end of our
Dunkin' Donuts U.S. development
growth target of 380 to 410 net new
restaurants, and 2014 free cash flow
growth should be greater than 15%,"
he said. "We continue to believe
Dunkin' Brands has tremendous
growth prospects, led by the opportunity for 17,000 plus Dunkin' Donuts restaurants in the U.S. and over
30,000 restaurants for both brands
globally." MBN
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Milling & Baking News - January 6, 2015

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