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DineEquity posts 3Q profit, sales remain weak

GLENDALE Calif. DineEquity Inc., the parent company to Applebee’s and IHOP, said Tuesday that cost controls, lower interest expense and reduced impairment charges helped it swing to a third-quarter profit from a year-ago loss, despite still negative sales trends.

For the quarter ended Sept. 30, net income totaled $7.9 million, or 46 cents per share, compared with a net loss of $16.4 million, or 98 cents per share, in the same quarter last year.

Helping to boost its bottom line were easier comparisons to a year ago when DineEquity booked $28.5 million in impairment and closure charges in its third quarter, versus $4.5 million booked this year. Latest-quarter interest expense fell 10 percent from a year ago and total costs and expenses fell 22 percent. DineEquity also said that restaurant cost controls helped Applebee’s margins rise 1 percentage point on reduced labor and food costs.

Latest-quarter revenue declined 14.7 percent to $333.6 million, and reflected mainly a reduced number of Applebee’s restaurants versus a year ago, as well as negative same-store sales. Over the past year, DineEquity has sold 110 Applebee’s Neighborhood Grill & Bar restaurants in an ongoing refranchising effort. At the end of the quarter, the Applebee’s chain included 399 corporate units and 1,598 franchised locations. The IHOP chain numbers 1,424 locations, which are nearly all franchised.

Applebee’s domestic systemwide same-store sales fell 6.5 percent for the third quarter, reflecting a drop of 6.2 percent at franchised locations and a 7.6-percent decline at corporate units.

At IHOP, domestic systemwide same-stores sales fell 1.1 percent, reflecting a higher average guest check and a decline in guest traffic, the company said.

“We are making meaningful progress in energizing the Applebee’s brand, with numerous marketing, menu and operational improvements achieved since we completed the acquisition nearly two years ago,” said DineEquity chief executive Julia Stewart. “We are confident that these efforts, along with additional improvements, will result in market share expansion as the economy begins to grow again.”

For the year, the company said same-store sales at the Applebee’s brand will most likely finish at the low end of its guidance, which is has pegged between a 2-percent and a 5-percent drop. At IHOP, expectations for an annual same-store sales result between a 1-percent drop and a 1-percent gain were reiterated.

DineEquity said limited-time offers such as the Hawaiian Pancakes and NFL football-themed dishes during the third quarter helped, as did dinner marketing activities, the chain’s Kids Eat Free program and other menu updates. For the fourth quarter, IHOP expects to benefit from a Holiday Hotcakes promotion as well as a plan to offer IHOP gift cards at more national retail sites.

Contact Lisa Jennings at [email protected].

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