Dunkin' Brands says U.S. election jitters slowing store openings

October 20, 2016 6:17 AM EDT

The logo of Dunkin' Donuts is on display in Tbilisi, Georgia, July 13, 2016. REUTERS/David Mdzinarishvili


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By Lisa Baertlein

(Reuters) - Dunkin' Brands Group Inc (NASDAQ: DNKN) on Thursday said franchisees are expected to open fewer doughnut and coffee shops this year due to uncertainty about the economy and regulations, which could be impacted by the outcome of U.S. elections next month.

Shares in Dunkin' Brands, which are fueled by expectations that Dunkin' Donuts will expand aggressively in the United States, fell 3.2 percent to $49.38 on Thursday.

The group now expects net new U.S. Dunkin' Donuts openings to be at the low end of a previously provided range of 430 to 460 stores this year.

Chief Executive Officer Nigel Travis told Reuters that some franchisees are putting new store plans on hold until after the Nov. 8 election, when the political landscape is more certain.

"Franchisees are uncertain which direction everything is going in terms of government," he said. "Everyone is sick to death of the election ... Once we know the direction we're going in, they'll be able to deal with it" and growth will resume, he added.

U.S. restaurants also are battling intense competition from upstart chains and meal-kit sellers, in addition to getting battered by falling grocery prices, which are encouraging more people to eat at home.

Franchisees could face problem no matter whether Republican Donald Trump or Democrat Hillary Clinton takes the White House.

There is growing speculation that Trump's sinking poll numbers could influence elections on the federal and state level, which could affect tax, healthcare and minimum wage policies. If local elections are hit, policies covering construction and business regulation could shift.

Clinton, among other things, has championed raising the minimum wage as well as paid family and medical leave. Trump takes a more pro-business stance with promises to lower taxes and slash regulations, but his erratic behavior during the campaign has raised concerns about how he would govern.

Survey results from the National Federation of Independent Business found that uncertainty among small business owners is at a 42-year high.

"Political uncertainty is big. This is definitely not just restaurants," said Bill Dunkelberg, chief economist for NFIB, which counts 325,000 small business owners as member.

Visits to Dunkin' Donuts and Baskin-Robbins were down in the latest quarter.

Sales of iced coffee and breakfast sandwiches helped overcome that weakness at U.S. Dunkin' Donuts outlets, where sales at established restaurants rose a better-than-expected 2 percent in the third quarter, according to results released on Thursday.

That was not the case at U.S. Baskin-Robbins ice cream shops, which reported a surprise 0.9 percent drop in same-store sales for the quarter.

Net income attributable to Dunkin' Brands rose to $52.7 million, or 57 cents per share, in the quarter from $46.2 million, or 48 cents per share, a year earlier.

Excluding items, the company earned 60 cents per share.

Dunkin' said total sales fell 1.3 percent to $207.1 million, due to the sale of company-operated stores to franchisees.

Analysts had expected total sales of $214.4 million and earnings per share of 59 cents, according to Thomson Reuters I/B/E/S.

(Reporting by Lisa Baertlein in Los Angeles; Additional reporting by Sruthi Ramakrishnan in Bengaluru; Editing by Alan Crosby and Lisa Shumaker)



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