) reported first quarter 2012 adjusted earnings of $1.36 per share,
surpassing the Zacks Consensus Estimate by 10 cents, but lagging
the prior-year quarter earnings by 6 cents.
Revenues in the reported quarter plunged 18.2% year over year to
Inside the Headline Numbers
DineEquity operates under Applebee's Neighborhood Grill &
Bar and IHOP brands. Applebee's domestic system-wide comparable
store sales scaled up 1.2% during the quarter, with franchise
same-restaurant sales up 1.0% and company-operated comparable
restaurant sales rising 3.9%. The domestic system-wide comparable
store sales improved sequentially, but fell on year-over-year
basis. The upside in domestic system-wide comps was driven by
higher average guest check, partially offset by a decline in
The domestic system-wide same-store sales at IHOP dipped 0.5%
during the quarter due to lower traffic, partially offset by rise
in average guest check.
Restaurant operating margin at Applebee's company-operated
restaurants expanded 250 basis points (bps) to 17.8% during the
quarter, attributable to a decline in labor expense and
depreciation, refranchising of lower margin restaurants and higher
average guest check, partially offset by food cost pressure.
During the first quarter, DineEquity opened 6 and closed 4
Applebee's franchised restaurants. The company also opened 10 IHOP
franchised restaurants and shut down 5 franchised unit as well as
one area licensed restaurant. At the end of the quarter, DineEquity
had 2,021 Applebee's and 1554 IHOP restaurants.
In the first quarter, the company succeeded in transitioning
more than 95% of its units into franchises, by refranchising and
selling 17 company-operated Applebee's restaurants located in
six-state markets around Tennessee.
The company continues to focus on the franchise business model
as it is less capital intensive and reduces volatility of cash
flow. DineEquity also expects to use the sale proceeds for reducing
its debt burden.
DineEquity ended the reported quarter with cash and cash
equivalents of $48.7 million and total shareholders' equity of
The company is in a deleveraging mode. In the first quarter, the
company reduced total debt burden by $85.9 million by using free
cash flow and proceeds of refranchise and sale of 17 units.
The largest full-service restaurant company in the world
reaffirmed its outlook for 2012. The company continues to expect
domestic system-wide comparable store sales in the range of 0.5% to
2.5% for Applebee's and in the range of negative 1.5% to positive
1.5% for IOHP.
Applebee's franchisees plan to open 30 to 40 restaurants by
year-end 2012, majority of which are expected to come up in the US.
IHOP franchisees expect to open 45 to 55 restaurants, mostly in the
We expect the estimates to go up in the coming quarter as the
company reported better-than-expected results and Applebee's is
poised for long-term success based on marketing initiatives, menu
innovation, technology improvement, operational improvements and
remodel program. Moreover with more than 95% of restaurants
franchised, DineEquity remains on track to achieve its long-term
goal. Besides, the company continues to focus on innovative menu
pipeline for 2012 to drive traffic. Additionally, domestic
systemwide same-restaurant sales of IHOP has improved sequentially
for three quarters, but still comps remain in the red and the
company has a long way to go for reporting profits.
DineEquity, which competes with
Texas Roadhouse Inc (
currently retains a Zacks #2 Rank, which translates into a
short-term Buy rating. We are also maintaining our long-term
Neutral recommendation on the stock.
DINEEQUITY INC (DIN): Free Stock Analysis
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