Dunkin' Donuts IPO: Shares Still Buzzing

Dunkin' Donuts shares hit the Nasdaq fully caffeinated Wednesday, and continue rising Thursday as the coffee sector gets a jolt from Green Mountain's strong profit.

Author:: Miriam Reimer
Publish date:: Jul 28, 2011 12:03 PM EDT

(Dunkin' Donuts IPO article updates an earlier version.)

CANTON, Mass. (

TheStreet

) --

Dunkin' Donuts owner Dunkin' Brands

shares began trading publicly on the Nasdaq fully caffeinated, surging more than 52% in their first day on the market and gaining another couple points on Thursday thanks to better-than-expected earnings results from

Green Mountain Coffee Roasters

(GMCR)

Dunkin' shares were 1.6% higher at $28.30 in trading Thursday. The stock closed up by 46.6% on Wednesday with more than 45 million shares changing hands.

>> Don't Buy Dunkin' Donuts IPO: Value Analyst

Dunkin's IPO was priced at $19 late Tuesday before it began trading Wednesday morning. The company, which was bought by a private-equity consortium including

Bain Capital

Carlyle Group

and

Thomas H. Lee Partners

in 2006 for $2.4 billion, sold 22.25 million shares in its market debut to raise around $423 million.

Dunkin's competitors didn't fared well in trading earlier this week, particularly as

most stocks got pounded as the debt ceiling standoff in Washington turned investors sour

. But on Thursday things were looking up for the coffee-and-doughnut space as Wall Street turned higher and as

Green Mountain Coffee Roasters

(GMCR)

offered better-than-expected third-quarter profit and revenue figures.

Green Mountain surged 19.5% to $105.30 in late-morning trading. The Vermont company beat profit expectations by a penny with earnings per share of 37 cents. Revenue of $608.4 million also came in better than analysts had called for.

Krispy Kreme Donuts

(KKD)

shares rose 2.3% to $8.46 in morning trading.

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While Krispy Kreme and Dunkin' share the word "doughnuts" or "donuts" in their name, the two have completely different business models, however, BGB Securities analyst Sam Yake told

TheStreet

recently. "Dunkin' has successfully evolved into a destination restaurant" like

Starbucks

(SBUX) - Get Report

and gets 60% of its revenue from driving repeat customers who go everyday as part of their lifestyle.

By comparison, 88% of retail sales at Krispy Kreme is just doughnuts, and the brand has not been able to evolve from a doughnut-only shop. The average customer visit at Krispy Kreme is once per month, whereas at Dunkin' it's much more, Yake estimated, at six to seven times per month.

Starbucks gained 3.9% to $40.47 on Thursday,

Peet's Coffee & Tea

( PEET) rose 2.3% to $59.23, Canada's

Tim Hortons

(THI)

added 2.8% to $48.27 and

McDonald's

(MCD) - Get Report

shares improved by 0.6% to $87.61.

Dunkin' Brands, which also operates the Baskin Robbins ice cream chain of stores, sells coffee, doughnuts and other food items. It boasts a loyal following, particularly in the northeastern U.S. where its stores are concentrated. Nearly 6,700 Dunkin' Donuts stores are in the Northeast, with another 100 or so spread around other parts of the country, but there are virtually no stores in the far West of the U.S. There are also more than 3,000 international locations of Dunkin' Donuts.

"Dunkin' Donuts doesn't have much coverage in the West, there seems to be a lot of potential to expand in that area," Josef Schuster, founder of Chicago-based IPO investment firm IPOX Schuster, told

Reuters

Baskin Robbins has more stores outside the U.S. than within; with nearly 6,500 stores around the world, just over 2,500 are domestic.

Dunkin' has widely been viewed as a growth stock as the company intends to expand in key geographic areas like Philadelphia, Chicago and South Florida. Stores west of the Mississippi River may be the next big focus of expansion.

Brand loyalty consulting firm

Brand Keys

ranked Dunkin' Donuts as the coffee brand with the most customer loyalty and engagement. Starbucks ranked second on the list, followed by McDonald's and Tim Horton's.

-- Written by Miriam Marcus Reimer in New York.

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Miriam Reimer

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