Starbucks Corporation and Drunkin' Brands Group, Inc. Investor Alerts: Latest Results From the Kings of Coffee

After mixed results, some investors might think that Dunkin' and Starbucks are no longer the amazing investments they were thought to be. Moving forward, are these businesses likely to outperform, or should investors look elsewhere for attractive opportunities?

May 2, 2014 at 5:00PM


Source: Starbucks

April 24 was a pretty big day for coffee lovers! Before the market opened, Dunkin' Brands (NASDAQ:DNKN), the parent company of Dunkin' Donuts and Baskin-Robbins, reported revenue and earnings for the first quarter of its 2014 fiscal year. This was followed up after the market closed with Starbucks (NASDAQ:SBUX) reporting the same metrics for the second quarter of its 2014 fiscal year. With some interesting results out, which of these businesses looks the most appealing, and which should the Foolish investor probably take a pass on?


Source: Dunkin' Brands

Dunkin' came up short
For the quarter, Dunkin' reported revenue of $171.9 million. While this is just a hair shy of the $172.2 million analysts expected but it's a respectable 6% higher than the $161.9 million management reported in the same quarter a year ago. According to the company's earnings release, its uptick in revenue is due to a combination of store openings and comparable-store sales improvements.

During the quarter, management saw 96 net new stores open, most of which took place in the company's Dunkin' Donuts U.S. segment. This increase in store count was complemented by a 1.2% increase in comparable-store sales, driven by increases in all of the company's segments with the exception of its Dunkin' Donuts international segment, which saw comparable-store results decline by 2.4%.


Source: Dunkin' Brands

Profitability was the company's worst metric, unfortunately. For the quarter, Dunkin' reported earnings per share of $0.21. Although this is only $0.01 lower than the business reported in the first quarter last year, it's far removed from the $0.36 analysts expected. Even though sales were higher, the company was negatively affected by a $13.7 million loss from the early extinguishment of debt.


Source: Starbucks

Starbucks' results could use some caffeine
For the quarter, Starbucks did better than Dunkin', but the company still fell shy of forecasts in at least one respect. Over the past year, the coffee giant saw its revenue rise 9% from $3.55 billion to $3.87 billion. Despite the fact that management enjoyed a 6% increase in comparable-store sales, revenue still failed to meet the $3.95 billion investors anticipated.

Unlike Dunkin', which disappointed on both the top and bottom lines, Starbucks handed investors earnings that were in line with forecasts at $0.56 per share and 10% above the $0.51 reported in last year's quarter. This was driven largely by the company's jump in revenue but was also due to the cost of revenue and other operating expenses declining as a percentage of sales.

Which coffee chain's business is brewing just right?
Over the past five years, Starbucks has been quite a growth engine. Between 2009 and 2013, the company saw its revenue soar 52% from $9.8 billion to $14.9 billion, while its net income increased 304% from $390.8 million to $1.6 billion (after adjusting for a $2.8 billion litigation charge it incurred in 2013). During this time period, the business benefited from a 19% increase in the number of locations it operated, which jumped from 16,635 to 19,767, while improved comparable-store sales helped account for the rest.

Revenue 2013 2012 2011 2010 2009
Starbucks $14.9 billion $13.3 billion $11.7 billion $10.7 billion $9.8 billion
Dunkin' $713.8 million $658.2 million $628.2 million $577.1 million $538.1 million

Source: Starbucks and Dunkin' Brands Group

From a profitability perspective, Starbucks saw its metrics improve because of the rise in revenue it experienced, but it also benefited greatly from reduced costs. Chief among these was the business' cost of revenue and selling, general, and administrative expenses, which fell from 44.2% of sales to 42.9% and from 39.7% of sales to 35.1%, respectively.

Unfortunately, Dunkin' hasn't been so lucky. Between 2009 and 2013, the company saw its revenue rise only 33% from $538.1 million to $713.8 million. Despite being a smaller business which should, in theory, be able to grow faster than a larger rival, Dunkin' saw its store count increase 18% from 15,373 locations to 18,158, while its comparable-store sales increased modestly.

Net Income

2013 2012 2011 2010 2009
Starbucks $1.6 billion* $1.4 billion $1.2 billion $945.6 million $390.8 million
Dunkin' $146.9 million $108.3 million $34.4 million $26.9 million $35 million

Source: Starbucks and Dunkin' Brands Group   *Excludes one time charges

Looking at net income, however, Dunkin's performance has been nothing short of extraordinary. Over this five-year period, the company's net income soared 320% from $35 million to $146.9 million. On top of benefiting from higher revenue, the company saw its cost structure improve significantly. The largest contributor to the business' heftier bottom line was its interest expense, which plummeted from 21.4% of sales in 2009 to 11.2% by year-end 2013.

Foolish takeaway
Based on the data provided, it looks like both Dunkin' and Starbucks failed to meet analyst expectations. While this could be a problem if both businesses continue this trend of disappointing results, the long-term growth of each company suggests that they will probably continue seeing increasing revenue and earnings moving forward.

Neither company appears to be a terrible investment right now, but for the Foolish investor more interested in seeing revenue growth, Starbucks would probably make for a more sensible investment, while Dunkin' looks promising for investors seeking out margin expansion.

Top dividend stocks for the next decade
The smartest investors know that dividend stocks simply crush their non-dividend paying counterparts over the long term. That’s beyond dispute. They also know that a well-constructed dividend portfolio creates wealth steadily, while still allowing you to sleep like a baby. Knowing how valuable such a portfolio might be, our top analysts put together a report on a group of high-yielding stocks that should be in any income investor’s portfolio. To see our free report on these stocks, just click here now.

Daniel Jones has no position in any stocks mentioned. The Motley Fool recommends Starbucks. The Motley Fool owns shares of Starbucks. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

1 Key Step to Get Rich

Our mission at The Motley Fool is to help the world invest better. Whether that’s helping people overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we can help.

Feb 1, 2016 at 4:54PM

To be perfectly clear, this is not a get-rich action that my Foolish colleagues and I came up with. But we wouldn't argue with the approach.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich" rated The Motley Fool as the #1 place online to get smarter about investing.

"The Motley Fool aims to build a strong investment community, which it does by providing a variety of resources: the website, books, a newspaper column, a radio [show], and [newsletters]," wrote (the clearly insightful and talented) money reporter Kathleen Elkins. "This site has something for every type of investor, from basic lessons for beginners to investing commentary on mutual funds, stock sectors, and value for the more advanced."

Our mission at The Motley Fool is to help the world invest better, so it's nice to receive that kind of recognition. It lets us know we're doing our job.

Whether that's helping the entirely uninitiated overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we want to provide our readers with a boost to the next step on their journey to financial independence.

Articles and beyond

As Business Insider wrote, there are a number of resources available from the Fool for investors of all levels and styles.

In addition to the dozens of free articles we publish every day on our website, I want to highlight two must-see spots in your tour of

For the beginning investor

Investing can seem like a Big Deal to those who have yet to buy their first stock. Many investment professionals try to infuse the conversation with jargon in order to deter individual investors from tackling it on their own (and to justify their often sky-high fees).

But the individual investor can beat the market. The real secret to investing is that it doesn't take tons of money, endless hours, or super-secret formulas that only experts possess.

That's why we created a best-selling guide that walks investors-to-be through everything they need to know to get started. And because we're so dedicated to our mission, we've made that available for free.

If you're just starting out (or want to help out someone who is), go to, drop in your email address, and you'll be able to instantly access the quick-read guide ... for free.

For the listener

Whether it's on the stationary exercise bike or during my daily commute, I spend a lot of time going nowhere. But I've found a way to make that time benefit me.

The Motley Fool offers five podcasts that I refer to as "binge-worthy financial information."

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. It's also featured on several dozen radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable ... and I don't say that simply because the hosts all sit within a Nerf-gun shot of my desk. Rule Breaker Investing and Answers contain timeless advice, so you might want to go back to the beginning with those. The other three take their cues from the market, so you'll want to listen to the most recent first. All are available at

But wait, there's more

The book and the podcasts – both free ... both awesome – also come with an ongoing benefit. If you download the book, or if you enter your email address in the magical box at the podcasts page, you'll get ongoing market coverage sent straight to your inbox.

Investor Insights is valuable and enjoyable coverage of everything from macroeconomic events to investing strategies to our analyst's travels around the world to find the next big thing. Also free.

Get the book. Listen to a podcast. Sign up for Investor Insights. I'm not saying that any of those things will make you rich ... but Business Insider seems to think so.

Compare Brokers