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DineEquity shares rise 15%

Owner of Applebee's and IHOP restaurants enjoys strong sales at both.

November 03, 2010|By Bill Kisliuk, bill.kisliuk@latimes.com

Fortunes improved in the third quarter for the Glendale-based parent of IHOP and Applebee's restaurants.

On Tuesday, DineEquity Inc. reported its first quarterly gain in sales at Applebee's since shortly after acquiring the chain in 2007. Same-restaurant sales at Applebee's improved by 3.3% compared with the same period in 2009, while IHOP sales gained slightly by 0.1% compared with 2009.

The company upgraded its sales forecasts for Applebee's, expecting the figure for the 2010 fiscal year to be within 1% above or below last year's sales. Its prior forecast ranged from flat sales to a 3% decrease.

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The stock market responded favorably, sending DineEquity shares from $42.34 at Monday's closing to $48.53 at the end of the day Tuesday, a gain of 15%.

DineEquity Chairman and Chief Executive Julia Stewart said the company is staying with the forecast that IHOP sales will come in the range of 1% percent up or down from last year.

"I believe IHOP is doing all the right things to protect and grow the brand," Stewart said in a conference call.

Stewart and Chief Financial Officer John Tierney said the average size of a guest check was up at IHOP and Applebee's, offsetting modest declines in the number of customers.

The company has nearly completed the sale of 61 Applebee's in Wisconsin for $28 million, and is in the process of selling nearly 60 more restaurants in the Midwest and Virginia for about $38 million.

"All of these transactions further DineEquity's strategic objective of transitioning Applebee's into a more heavily franchised system over time," Stewart said.

The shift, which Stewart said limits volatility and the need for capital, mimics the way the company runs IHOP. DineEquity owns only 10 of the 1,471 IHOP restaurants. It owns 393 of 1,607 Applebee's.

Stewart said the IHOP chain is on track to open between 60 and 70 new stores this year and remodel as many as 250 others by the end of the year.

Applebee's franchisees are looking to open between 25 and 30 new restaurants this year. Stewart said the chain will promote its efforts to appeal to late-night diners and sports fans tracking their favorite football or other teams.

"There is just a whole group of Americans that loves being part of a larger group at night," Stewart said.

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