Friday, October 28, 2016

Looking For Hope

Last week I wrote an essay called We Are All Doomed, about the apparent inability of Americans to recognize the discrepancies between their words and their actions or to see the connection between those actions and predictable consequences causing them to make the same mistakes over and over.  It was a pretty pessimistic piece of prose.

But that is not my usual tone.  I really do try to hold out hope.  So when I saw the partial headline:  “DUNKIN' DONUTS: People aren't buying doughnuts because…”, my first thought was very encouraging.  Great, people are laying off the donuts due to a rational concern for their health.  They are not obsessing about gluten or organics or artificial ingredients; they are concerned about something real – donuts = calories!  With so many Americans overweight, a downturn in donut sales is good news.  It shows responsibility, a willingness to take some action to correct the situation, and discipline, the ability to forego the temporary pleasures of today in return for a healthier tomorrow.  It also shows some perspective, properly classifying drive-thru donuts and coffee as a luxury.

With this in mind, I followed the link to read the full story.  The full headline on the Business Insider website was, “DUNKIN' DONUTS: People aren't buying doughnuts because they're worried about the election.”  That doesn’t make sense.  You would of think donuts as comfort food.  They should sell more if people feel under stress.

Upon further reading, I found that it was common these days for CEOs to blame the election for financial shortfalls.  In fact the news was not so bad for Dunkin’.  They reported profits and US same-store sales higher than analysts’ expectations, but total revenue was lower.  And they will not open as many new stores this year as originally planned.  More donuts were sold, but not enough donuts to make management happy.  This supports my comfort-food theory better than the election excuse, but it’s not unusual for CEOs to take credit for good news while blaming some outside force for falling short – looking good in a strong economy and pointing fingers in a poor one, for example.

In this case, the CEO blamed “changes in gas prices, changes in food stamp regulations, and…the presidential election."  Taken one at a time: 

First, this graph from the US Energy Information Administration (EIA) shows gas prices lower this year than several prior years.

Second, it is hard to believe that such a significant portion of their business came from food stamp recipients to affect their overall results.  But if new regulations discouraged people who are having trouble feeding their families from buying donuts, that’s not necessarily a bad thing.

Finally, “last year, researchers at Princeton and Chicago found that election uncertainty affects consumers' outlook, but not their immediate spending.”

That’s three strikes for the CEO, but unfortunately, not much support for my original hope that responsibility, discipline and perspective are making a comeback based on information from the quick-service donut business.

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