Investment Conclusion. In our opinion, F2Q2020 was an upbeat quarter for Dunkin' Brands (DNKN). Its Dunkin' business: posted reduced same store sales declines on a month to month basis; generated low double digit same store sales growth at its west coast restaurants; likely captured market share from competitors; paid back the variable rate loan it had secured in the first quarter; reinstated its dividend; and indicated plans to hire 25,000 employees. In addition, we believe the quarter represented a trough in the company's COVID-19 related decline in retail sales and expect additional improvement in the element over the next few quarters. Moreover, in our assessment, DNKN's strategy to keep most of its Dunkin' stores open at the height of the pandemic, when a majority of stores operated by key competitors were closed, introduced Dunkin' and its brand of good quality low priced coffee beverages and snacking options to customers that previously would have avoided Dunkin', has resulted in a permanent shift in market share towards the coffee chain. Furthermore, we view DNKN's planned closures of 800 unprofitable and/or off-strategy Dunkin' stores in the U.S. as favorable for the company's long-term profitability and growth prospects. Finally, in our judgement, DNKN's plans to revert financial decisions it had made to deal with COVID-19 related uncertainties, indicate that the firm is unlikely to experience liquidity issues over the course of the pandemic. Based on the above described narrative, it appears that the company is well positioned to ride out the pandemic with little impact on its key fundamentals or longer term growth potential. Therefore, we reiterate our Buy Rating and $83/share Price Target for DNKN. (Please go through our initiation report "Dunkin' Brands: Slow And Steady Wins The Race - Buy On Valuation" for our long-term opinion on the stock).
F2Q2020 Results Summary.
