Revitalization efforts at Applebee’s helped move third-quarter same-store sales into positive territory for the first time since early 2008, contributing to an upgraded outlook for the year, parent company DineEquity Inc. reported Tuesday.
The better-than-expected results sent the company’s stock climbing. In midday trading, the stock price was up nearly 15 percent to $48.65.
For the third quarter ended Sept. 30, domestic systemwide same-store sales for Applebee’s Neighborhood Grill & Bar were up 3.3 percent, the fourth consecutive quarter of improvement for the casual-dining brand and the first positive results since the first quarter of 2008.
Same-store sales were up 3.8 percent at Applebee’s’ domestic franchise locations and 1.2 percent at company-owned domestic restaurants, the company said.
“Applebee’s’ revitalization strategies are taking hold in a meaningful way,” said Julia Stewart, DineEquity’s chair and chief executive, in a conference call to analysts Tuesday. “I couldn’t be more pleased with what we have accomplished.”
Stewart credited Applebee’s’ move toward later hours — with about 82 percent of the 2,000-unit Applebee’s system now open until midnight or later — as well as menu upgrades, marketing enhancements and store remodels.
Next week, the company plans to launch a new line of steaks in different sizes with various sauces and toppings, Stewart said. Applebee’s margins also improved in the third quarter to 14.8 percent, compared with 13.6 percent the same quarter last year.
Sister brand IHOP reported a modest same-store sales increase of 0.1 percent for the quarter.
DineEquity reported a net income of $7.8 million for the quarter, or 44 cents per diluted share, compared with $7.9 million, or 46 cents per diluted share in the same quarter last year. Per-share earnings declined because there were more shares outstanding, the company said. Excluding non-cash interest expenses and restructuring impacts, earnings were 95 cents per share for the quarter, compared with 97 cents a year ago.
Systemwide revenues were $335.4 million, up 0.5 percent from the $333.6 million reported in the same quarter last year.
During the third quarter, DineEquity also announced the refinancing of debt, which Stewart said would “provide us with considerable operating flexibility going forward as we execute our strategic plans for both brands.”
On Oct. 20, the company completed a $1.8 billion refinancing through a $950 million senior secured credit facility and $825 million of senior unsecured notes.
Also during the quarter, DineEquity announced the pending or completed sale of 119 Applebee’s locations as part of the company’s ongoing effort to shift the brand to an almost-all-franchised model after acquiring the bar-and-grill brand for an estimated $2 billion in 2007.
The sale of 61 company-operated units in Minnesota and Wisconsin was completed during the quarter, resulting in after-tax proceeds of $28 million.
The company also announced the asset purchase agreement for the sale of 20 company locations in Virginia, resulting in expected after-tax proceeds of $12 million, which is expected to close in the fourth quarter. The sale of another 36 locations in Missouri and Illinois also is pending and is expected to result in after-tax proceeds of $26 million.
Once those transactions are complete, the company said the Applebee’s system will be 92-percent franchised.
Upgrading its guidance for the year, the company now expects same-store sales at Applebee’s’ domestic locations to range between negative 1 percent to an increase of 1 percent. Previously, the company had predicted same-store sales of flat to negative 3 percent.
The company reiterated earlier projections for IHOP’s domestic same-store sales for the year of between positive 1 percent to negative 1 percent.
The company expects franchisees to open 60 to 70 new IHOP locations before the end of the year, while Applebee’s franchisees will open between 25 and 30 new units this year.
Glendale, Calif.-based DineEquity operates or franchises 2,000 Applebee’s and 1,471 IHOP locations.
Contact Lisa Jennings at [email protected].