GLENDALE Calif. DineEquity Inc. downgraded its fiscal 2008 outlook for Applebee's on Thursday while blaming the casual-dining chain's third quarter same-store sales negativity and IHOP's nearly flat results on the "very challenging" economic climate.”
For the three months ended Sept. 30, IHOP eked out a 0.2-percent systemwide rise in same-store sales, reflecting negative traffic and a higher average check. Applebee's U.S. same-store sales fell 3.1 percent both at company-operated and domestic franchised branches. At corporate Applebee's, a decline in traffic also offset a higher average check.
"Given the increasing turmoil and uncertainty facing the economy and the sharp pullback in consumer spending witnessed in the third quarter 2008, we are in the midst of a very challenging time in the restaurant industry," said DineEquity chairman and CEO Julia A. Stewart.
Applebee's value marketing, which failed to boost sales in the third quarter, will be intensified in the current quarter with new promotions, she said. DineEquity now expects that Applebee's annual results would be down 1 percent to 2 percent, versus the company’s previous forecast that the range would be either down or up 1 percent.
For IHOP, DineEquity said it expects systemwide same-store sales growth for the year at the lower end of its previously forecast range of between 2 percent and 4 percent.
DineEquity and its franchisees operate 1,375 IHOPs and 1,997 Applebee’s. Full third-quarter results are due Oct. 2.