Which Donut Is More Popular- Krispy Kreme Doughnuts (KKD) or Dunkin Brands Group Inc (DNKN)?

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Donuts. Who doesn’t love them?

America’s two most favorite doughnut brands are without question Dunkin Brands Group Inc (NASDAQ:DNKN) and Krispy Kreme Doughnuts (NYSE:KKD). But which brand does America love more?

Dunkin Brands Group Inc (NASDAQ:DNKN)

Dunkin’ Brands Group operates more than 17,400 points of distribution in nearly 60 countries worldwide, including 10,400 Dunkin’ Donuts and 7,000 Baskin-Robbins. The Krispy Kreme hot Original Glazed® doughnut can be found in 22 countries, and the company operates 773 stores.

Clearly Dunkin’ Donuts operates more stores, but everyone knows that both brands sell doughnuts in more places than just their stores. Neither company reports the number of doughnuts sold (but wouldn’t it be cool if they did?), so investors will just have to judge the companies on the numbers like they would for any other brand. (Followed by a thoughtful taste test, of course.)

Performance

For the quarter ended May 5 (Q1 FY 2014), Krispy Kreme Doughnuts (NYSE:KKD) beat expectations on revenue and met expectations on earnings per share. Profit increased 33% on 11% revenue growth. The company brought in revenue of $120.6 million, and GAAP reported sales were 11% higher than the prior-year quarter’s $108.5 million. Same-store sales increased 11.4% from the same quarter in the year previous year, the company’s 18th straight quarterly increase, giving investors something to smile about besides a hot glazed doughnut.

Dunkin Brands Group Inc (NASDAQ:DNKN) has a market cap of more than $4 billion. The dividend yield is about 1.9%. The long-term EPS growth forecast is more than 15%. The operating margin is higher than the industry average and the return on equity is more than 19%.

The company is on a roll, expanding all around the U.S., particularly in the Western states. Dunkin Brands Group Inc (NASDAQ:DNKN) estimates it will open 330 to 360 new restaurants in 2013 — that is nearly 50% of the number of stores Krispy Kreme Doughnuts (NYSE:KKD) operates! Nearly one-fifth of the new restaurants will be located in the Western states, and are expected to bring in 64% of sales in 2013. Dunkin’s first-year sales growth in the West and new emerging markets grew 30%, while sales growth in the established markets grew 17%.

The company’s full-year 2013 earnings guidance details 6% to 8% growth in revenue, 10% to 12% growth in adjusted operating income, and an EPS between $1.50 to $1.53, equal to a growth of about 15%. Growth for 2014 and beyond is estimated at about 17%.

Playing field

Both Dunkin Brands Group Inc (NASDAQ:DNKN) and Krispy Kreme Doughnuts (NYSE:KKD) are strong, solid, tasty investments on their own. It may appear at first that Krispy Kreme is not really in competition with Dunkin’ Donuts based on the number of stores alone. But the real truth hides in the revenue and profits — Dunkin’ Donuts (not overall Dunkin’ Brands) saw U.S. revenue of $119.6 million in the most recent quarter, and Krispy Kreme brought in revenue of $120.6 million. Krispy Kreme may not have as many stores, but it makes up for it in sales through other venues.

However, Jim Morgan, CEO of Krispy Kreme Doughnuts (NYSE:KKD), doesn’t want you to compare his brand and Dunkin Brands Group Inc (NASDAQ:DNKN). Krispy Kreme is happy to be just what it is — a doughnut shop. The company is 87% doughnuts and 13% beverages. The company has not changed its style or offerings much over the years. That doesn’t mean it doesn’t see some room for growth and change.

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