By Tonya Garcia, MarketWatch
Customers who go to Dunkin’ for the plant-based Beyond Sausage sandwich spend nearly twice the average ticket, according to the coffee retailer.
The Beyond Meat Inc. /zigman2/quotes/211617595/composite BYND +5.72% item was added to Dunkin’ Brand Group Inc. /zigman2/quotes/200947441/composite DNKN +1.47% locations nationwide in November. Dunkin’ said the launch was successful and says it has had “sustained performance” since.
“[The Beyond Sausage sandwich] attached well with premium-priced cold brew and espresso beverages, delivering an average check north of $9,” said David Hoffman, chief executive of Dunkin’ on the company’s earnings call, according to a FactSet transcript.
The average ticket for Dunkin’ is around $5, the company told MarketWatch.
The average plant-based customer is younger, skews female and is located on the coasts, Hoffman added on the call.
Even with this information, analysts at BTIG weren’t ready to declare the Beyond Sausage a winner for Dunkin’.
“We believe it will take several more quarters before investors can determine the sustained appeal of this item,” BTIG wrote in a note.
Dunkin’ also aims to continue stepping up its coffee game with new espresso machines that were installed at more than 9,000 locations. And the company announced it would invest $60 million in 2020 to install “state-of-the-art high-volume brewing equipment” in U.S. Dunkin’ locations. The new machines will help the company add drip coffee blends to the assortment, increase efficiency and reduce waste.
The move is part of the “NextGen” program that also includes store remodels.
“While encouraged by the growth of Dunkin’s digital ecosystem with over 13 million DD Perks members and success of the espresso platform, which grew 40% this quarter, we remain concerned by the persistently negative traffic trends,” BTIG said.
Dunkin’ said traffic for the fourth quarter and for the full-year were negative.
Analysts led by Peter Saleh said the equipment investment will inhibit the operating income growth target. And competition with Starbucks Corp. /zigman2/quotes/207508890/composite SBUX +0.60% , Wendy’s Corp. /zigman2/quotes/204070192/composite WEN +2.20% , which will launch a breakfast menu on March 6, and McDonald’s Corp. /zigman2/quotes/203508018/composite MCD +0.10% will make traffic growth difficult.
BTIG rates Dunkin’ stock neutral.
“We believe equipment upgrades, technology, menu simplification, and remodels have repositioned Dunkin’ to better compete,” wrote KeyBanc Capital Markets analysts led by Eric Gonzalez. “That said, Dunkin’ stock remains among the most expensive in its peer group, and we see limited upside.”
Dunkin’ stock closed Thursday at $75.03. Shares dipped 3.4% for the week, though they have gained 11% over the last year. The S&P 500 index /zigman2/quotes/210599714/realtime SPX +0.50% is up 24% for the past 12 months.
Dunkin’ reported fourth-quarter profit and sales that beat expectations. The company also announced a new stock buyback and a dividend increase.
However, the company expects revenue to grow in the low-to-mid single digits in 2020, expects EPS to range from $2.96 to $3.05 and adjusted EPS of $3.16 to $3.21. The FactSet consensus is for revenue of $1.41 billion, implying a 3.2% increase, and EPS of $3.22.
KeyBanc rates Dunkin’ stock sector weight.
Wedbush is optimistic that Dunkin’ can handle the Wendy’s breakfast rollout.
“We expect any impact to be relatively manageable and transient, with ongoing sales initiatives serving as same-store sales growth tailwinds,” analysts wrote.
Analysts rate Dunkin’ shares outperform with an $88 price target, down from $90.