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Dunkin' Brands' Baskin-Robbins Banks on Expansion For Growth

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Dunkin' Brands Group, Inc.’s (DNKN - Free Report) unit Baskin-Robbins will continue its expansion in Ontario. Per the company, the expansion will primarily be concentrated in the Greater Toronto Area. Baskin-Robbins has signed 18 new store development agreements with existing as well as six new franchise groups.

Baskin-Robbins is the largest chain of ice cream specialty shops globally. The brand offers innovative, premium hard scoop ice cream and soft serve, custom ice cream cakes, in addition to a full range of beverages.

We believe the company’s drive to expand footprint will help revive Baskin-Robbins U.S. sales. In second-quarter 2018, the segment’s revenues were down 1.1% from the prior-year quarter to $14.1 million owing to a decrease in royalty income, and sales of ice cream as well as other products, offset by an increase in franchise fees. Comps dipped 0.4% compared with year-ago quarter’s decline of 1%.

Expansion to Drive Growth

Moreover, given its growing popularity, the company is expanding presence in the emerging markets of Asia and the Middle East. The company is also of the opinion that the market of South Africa holds great potential. To this end, the company has inked a franchise agreement to develop more than 250 Dunkin' Donuts restaurants and more than 70 Baskin-Robbins shops in the country over the coming years. Such expansion strategies should boost the company’s top-line. The company has prioritized Chile, Philippines, Thailand and Germany as these countries are driving results. Meanwhile, Dunkin’ Donuts is working on the design of its restaurant image and plans to have beta locations in market by later this year.

Notably, backed by strong brand presence and various sales-building efforts, the Zacks Rank #3 (Hold) company’s shares have returned 45.5% in the past year, outperforming the industry’s collective growth of 8.4%.

Key Picks

Better-ranked stocks worth considering in the same space include BJ's Restaurants, Inc. BJRI, Darden Restaurants, Inc. DRI and Dine Brands Global, Inc. DIN. BJ's Restaurants sport a Zacks Rank #1 (Strong Buy), while Darden Restaurants and Dine Brands Global carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

BJ's Restaurants earnings have surpassed the Zacks Consensus Estimate by an average of 6.4% in three out of the trailing four quarters.

Darden Restaurants delivered better-than-expected earnings in the preceding four quarters, with an average beat of 3.1%.

Dine Brands Global reported better-than-expected earnings in the trailing four quarters, with an average beat of 8.1%.

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