Dunkin’ Brands CEO Nigel Travis on Monday defended the coffee chain’s business model, weeks after famed investor Jim Chanos said he had taken a short position on the stock.
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“Our profit margin is going up as a corporation. Our franchisees’ profit margins are very steady,” Travis said in an interview with The Street. “Obviously there’s some pressure from things like minimum wage and what have you, but to me, I just can’t understand what is wrong with it.”
Travis’ comments came days after Chanos, who famously shorted Enron’s shares before its collapse, told CNBC in April he was betting against Dunkin and Restaurant Brands, the parent company of Burger King. Chanos argued that franchise-based chains have experienced declining profit margins in recent years.
“Everybody wants to sell the restaurants and not own them but basically clip the coupon of collecting royalties,” Chanos said. “And we’ve had this dichotomy now of restaurant stock multiples going higher and higher and higher as restaurants themselves have struggled. I think at some point that has to come to an end.”
Dunkin’ Brands’ stock has risen roughly 3% since Chanos’ remarks. Dunkin’ Donuts reported a U.S. same-store sales decline of 0.5% in its most recent fiscal quarter, even as overall revenue rose 1.7% and the company added 71 new Dunkin’ Donuts and Baskin-Robbins store locations.
“Most companies in our space grow through comps. We’re growing through comps and development,” Travis said, noting that Dunkin’ Brands sales of branded consumer goods had risen to $700 million from $400 million in the last year.
“I think the bottom line is, people believe us rather than him. Look at what’s happened to the stock since he said it,” he added.