News Releases April 23, 2004
Allied Domecq Quick Service Restaurants Deliver Strong Performance for the First Half of the 2004 Fiscal Year
Randolph, Mass. (April 23, 2004) - Allied Domecq Quick Service Restaurants (ADQSR), a unit of Allied Domecq PLC (NYSE: AED) and operator of restaurant brands Dunkin' Donuts, Baskin-Robbins, and Togo's, today released its half-year financial results for the six months to February 29, 2004.
Year-on-year highlights include:
Trading profit up 51% to $60.3 million including cost savings of $6.5 million, due to restructuring within all three brands and improved focus on operational systems and standards.
Distribution points up 8%
Number of multiple brand stores increased 33%
System-wide sales growth of 8%
Gross Profit increased by 8%
"We are pleased to report continued growth in our business, driven by strong same store sales growth, increased pace of new store openings, and cost savings from a year-long internal reorganization," said ADQSR Chief Executive Officer Jon L. Luther. "Our success can also be attributed to the dedication of our newly realigned organization and our increased focus on our brands."
"The highlight of the year so far has been our new espresso-based offerings at Dunkin' Donuts, which are exceeding our expectations," said Luther. "Based on the strong customer response in New England and the Mid Atlantic States, we are optimistic that these products are providing significant growth opportunities outside our core markets and are a key reason ADQSR's growth rate continues to outpace the industry."
"We are also taking steps to revitalize our Baskin-Robbins and Togo's brands through new concept stores as well as store and menu enhancements aimed at recapturing the brands' strong original appeal. As we head into the seasonably strong period for Baskin-Robbins and Togo's we look forward to further improvements in their performance." Luther continued, "Growing our brands remains a priority. Our multiple brand stores are performing well. These stores offer customers more choices and increase operational efficiency for our franchisees, while we continue to seek new opportunities in the US, Europe, and Asia."
Allied Domecq PLC CEO Philip Bowman added "We are pleased with the contribution of our QSR business in the first half. This business continues to be highly profitable and cash generative, playing a key strategic role in the Group's ongoing commitment to creating shareholder value."
RESULTS BY BRAND
Dunkin' Donuts delivered an 11% growth in global system-wide sales driven by a 5.2% increase in US same store sales and a 7% increase in global distribution points. The strong growth in same store sales growth which continues to outpace the overall QSR industry has been driven by product innovation and effective marketing. The innovation program has successfully launched a new range of coffee offerings, which include latte, cappuccino and espresso products, in 1,800 stores in the New England and Mid Atlantic areas. The launch has been supported by the introduction of new high speed coffee machines which maintain Dunkin' Donuts reputation for speed, quality and value for money. In addition, a new limited time offer hot apple pie product has been very well received and helped to extend Dunkin' Donuts sales into the traditionally quieter afternoon period. Marketing campaigns have focused around the new coffee offerings and highly successful regional program with Curt Schilling, the Boston Red Sox All-Star baseball player.
Baskin-Robbins grew global system-wide sales by 4% driven primarily by new store openings, up 10%. Same store sales in the US increased by 0.2% reflecting poor weather in the US and difficult economic conditions in California. A new store concept trial will begin in California and selected international markets to revitalize the stores and the consumer offering. Baskin-Robbins has also rolled out its seasonal ice cream flavors for the winter menus and focused on marketing the successful promotional ice cream cakes in December.
Poor economic conditions in California - Togo's largest market - affected sales resulting in a 9% decline in system-wide sales. A store and menu enhancement program has begun, which is designed to refresh the brand's appeal to the consumer. About 100 stores have been refurbished with encouraging early results. In addition, the "half & half" menu concept where consumers can choose any two from sandwich, soup or salad combinations is proving popular.
MULTIBRANDING REVIEW
The strategy of multiple branded stores which combine Dunkin' Donuts and Baskin-Robbins, or all three brands, under one roof continues to be a key driver of growth in new store openings, with a 33% increase in the number of combination stores to almost 1,200 stores. This strategy is supported by the brands' complementary day-part offering and brings benefits to franchisees through improved scale and operating efficiencies, along with increased choices for consumers. The triple branded stores, or "All Day" stores, have shown significant performance improvement year over year.
ADQSR'S international business continued to grow with system-wide sales increasing by 3% and brand distribution points increasing by 7%. With the exception of Korea, where the market is facing significant economic issues, there has been good growth in international markets for the ADQSR brands, most notably in Japan, Australia and the Middle East. The marketing focus for both the Dunkin' Donuts and Baskin-Robbins brands has been on beverages, in addition to the brands' core businesses of bakery and ice cream, respectively.
During 2003, the QSR business was restructured to optimize focus on each of the three brands and to improve operational systems and standards, menu and product development and the expansion of the international business. The reorganization has resulted in a leaner and more focused organization providing operational synergies. This resulted in an exceptional charge of $14.1m in the last financial year which has generated cost savings of $6.5m in the period.
ADQSR PERFORMANCE
(Millions - USD)
FY '04
(9/03-2/29/04) FY '03
(9/02-2/28/03) CHANGE % CHANGE
QSR Turnover $179.0 $200.6 -$21.6 -11%
% of ADPLC Turnover 8% 9% -1%
QSR Gross Profit $166.0 $154.2 $11.8 8%
% of ADPLC Gross Profit 11% 11% 0%
QSR Trading Profit $60.3 $39.9 $20.4 51%
% of ADPLC Trading Profit 10% 7% 3%
Total Brand Distribution Points 11,610 10,753 857 8%
* Turnover saw a decline from Fiscal 2003 to Fiscal 2004 due to the outsourcing of our ice cream manufacturing to Dean Foods. Excluding the outsourcing of maunufacturing, underlying turnover increased 7%
** Gross Profit is used for comparison purposes due to the fact that ice cream manufacturing has been outsourced to Dean Foods
About Allied Domecq Quick Service Restaurants
Allied Domecq Quick Service Restaurants franchises over 11,000 Dunkin' Donuts, Baskin-Robbins and Togo's stores worldwide. With over 143 years of combined franchising experience, the company's mission is to thrill customers, enrich stakeholders and build powerful brands. ADQSR is also a pioneer in developing and practicing a complementary day-part strategy, which combines two or three of its brands under one roof. Headquartered in Randolph, Massachusetts, ADQSR is part of Allied Domecq PLC (NYSE:AED), a highly successful and dynamic global business in spirits, wines, and quick service restaurants. More information can be found on Allied Domecq QSR's website, www.ADQSR.com.
Founded in 1950, Dunkin' Donuts Incorporated is the largest coffee and baked goods chain in the world with 5,800 locations in 32 countries around the world. Dunkin' Donuts sells more regular coffee, donuts, bagels and muffins than any other retailer in the United States. For more information, visit www.dunkindonuts.com.
About Baskin-Robbins
As the world's largest chain of ice cream specialty stores, Baskin-Robbins creates and markets its innovative, high-quality premium ice cream, specialty frozen desserts and beverages in the company's more than 5,100 retail stores around the globe. Baskin-Robbins carries on the tradition of offering spoonfuls of happiness to millions of customers every day. For more information, visit www.baskinrobbins.com.
About Togo's
Togo's originated in San Jose, California in 1971 and today is the neighborhood sandwich shop in more than 400 locations. Each Togo's sandwich is freshly crafted from quality ingredients, resulting in delicious sandwich creations full of big flavor and instant crave-appeal. Togo's signature sandwiches include Hot Pastrami, Turkey & Avocado and BBQ Chicken. For more information, visit www.togos.com.
Cautionary statement regarding forward-looking information:
Some statements in this press release contain "forward-looking" statements as defined in Section 21E of the United States Securities Exchange Act of 1934. They represent our expectations for our business, and involve risks and uncertainties. You can identify these statements by the use of words such as "believes", "expects", "may", "will", "should", "intends", "plans", "anticipates", "estimates" or other similar words. We have based these forward-looking statements on our current expectations and projections about future events. We believe that our expectations and assumptions with respect to these forward-looking statements are reasonable. However, because these forward-looking statements involve known and unknown risks, uncertainties and other factors which are in some cases beyond our control, our actual results or performance may differ materially from those expressed or implied by such forward-looking statements.