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Dunkin's drip coffees, hand-crafted espressos lift sales above expectations

Dunkin's drip coffees, hand-crafted espressos lift sales above expectations
A drink and a doughnut are seen at a Dunkin' Donuts location in the Chicago suburb of Niles, Illinois, February 4, 2015. REUTERS/Jim Young/File Photo -
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Jim Young(Reuters)
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(Reuters) - Dunkin' Brands Group Inc reported better-than-expected quarterly same-store sales at its donut stores, as more customers bought its new handcrafted espresso beverages, drip coffees and cold brews, sending its shares up 5 percent.

Dunkin', previously known as Dunkin' Donuts, revamped itself to change everything from its logo, store decor and menu to better compete with rivals, which are also tinkering with menu items and store ambience in a cut-throat U.S. coffee market.

Along with digitising its stores to speed up service and improve ordering experience, Dunkin' introduced more premium coffees, new espresso beverages and began serving breakfasts.

It also reduced its selection of donuts from 30 to 12 in favour of adding better-for-you breakfasts such as egg white bowls and chipotle bacon sandwiches to its menu.

The success of the efforts reflected in the donut chain's U.S. same-store sales, which rose 2.4 percent and beat analysts' expectations for growth of 1.43 percent, according to Refinitiv IBES data. The U.S. market accounts for about half of the company's total revenue.

Chief Executive Officer David Hoffmann said the U.S. growth was the largest quarterly comparable store sales increase in four years.

"I think we made some good investments in 2018," Hoffmann said in an interview, referring to its coffee line-up.

Dunkin' also sold more donuts in the quarter, even as consumers shy away from sugary snacks.

"In terms of any of those health concerns, we haven't seen it show up for us," Hoffmann said.

The chain's international business also showed strong results, driven by strength in the Middle-East, South-East Asia and Australia.

However, Baskin-Robbins, the company's ice-cream chain, continues to struggle. Sales in U.S. stores open for at least an year fell 2.8 percent, partly hurt by a cold winter. International sales also dropped.

Still, total revenue rose about 6 percent to $319.1 million (£244.4 million), beating expectations of $312.5 million.

Net income rose to $52.3 million, or 63 cents per share, in the three months ended March 30 from $50.2 million, or 57 cents per share, a year earlier.

Excluding one-time items, the company earned 67 cents, beating analysts' average estimate by 5 cents.

The company's shares are up about 17 percent this year including Thursday's gains.

(Reporting by Nivedita Balu in Bengaluru; Editing by Anil D'Silva)

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