Dunkin' Brands Group Inc (NASDAQ:DNKN) Q1 2018 Earnings Conference Call - Preliminary Transcript

Apr 26, 2018 • 08:00 am ET


Dunkin' Brands Group Inc (NASDAQ:DNKN) Q1 2018 Earnings Conference Call - Preliminary Transcript


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Nigel Travis

both brands delivered $220 million in retail sales in Q1, including $34 million in ready-to-drink sales. Our growth in CPG, again, is unique in our industry and we have a strong, solid pipeline of new products which Dave will touch on later.

Other highlights of the quarter included the unveiling of the first iteration in the US of our next generation Dunkin', which many of you experienced on Investor Day. And, of course, we entered into a $650 million accelerated share repurchase program during the first quarter. The accelerated share repurchase illustrates our continued commitment to utilize our strong balance sheet to return capital to shareholders.

More on that later from Kate. Lastly, I would like to highlight that while we were confident in the 2017 menu simplification test results, and we knew it was the right thing to do if we progressed with the blueprint, we also knew it was an unprecedented effort for the Dunkin' system going from 1,000 to 9,000 restaurants with a new simplified menu.

We are proud of the team effort that it took to execute this program, despite the other headwinds we were facing in the first quarter. Dave, of course, will get into this in more detail.

And with that, I'll pass you over to my friend, Dave Hoffmann, to discuss the Q1 performance of Dunkin' Donuts in the US.

David L. Hoffmann

Thanks, Nigel. As we have spoken about on previous earnings calls and at our investor date, the Dunkin' US blueprint for growth is all about delivering strategic sequencing that will result in a more modern and transformational expression of the brand. We are pleased with the progress we are making on this multiyear plan and on the momentum we have built with the franchisees to solidify Dunkin's positioning as a beverage-led on-the-go brand.

And as Nigel said, in the first quarter, we completed a critical element of the blueprint with the national rollout of menu simplification. This massive undertaking resulted in a 10% reduction of required menu items, as well as the elimination of another 23 optional products, most of which were slow moving, complex, and off strategy.

Fundamental to the success of the rollout was our level of partnership with the franchisees during this process. Their support and collaboration was unparalleled, and we are pleased to hear from many of them about how happy they are with the streamlined restaurant. Today, the simplified menu is in 100% of the Dunkin' US system.

We expect to see an impact to comparable store sales of about 100 basis points in the months following the launch, similar to what we experienced in the test markets. We continue to believe that over the long run, the simplified menu is an investment in a better environment for our people by taking complexity out of the restaurants.

This in turn will enable the crew to deliver a better guest experience, improve order accuracy, drive franchisee profitability, and ultimately, increase restaurant level margins. Okay. Looking at overall first quarter