) reported fourth quarter 2011 adjusted earnings of 91 cents per
share, surpassing the Zacks Consensus Estimate of 85 cents as well
as the prior-year earnings of 59 cents per share. In 2011, adjusted
earnings were $4.29 per share versus $3.50 in the prior year.
Revenues in the reported quarter plunged 19.3% year over year to
$242.3 million. In fiscal 2011, revenue increased 24.0% year over
year to $1.08 billion.
Inside the Headline Numbers
DineEquity operates under Applebee's Neighborhood Grill &
Bar and IHOP brands. Applebee's domestic system-wide comparable
store sales inched up 1.0% during the quarter, with franchise
same-restaurant sales up 0.8% and company-operated comparable
restaurant sales rising 3.4%. The domestic system-wide comparable
store sales improved sequentially, but fell on year-over-year
The domestic system-wide same-store sales at IHOP dipped 1.0%
during the quarter due to lower traffic.
Restaurant operating margin at Applebee's company-operated
restaurants dropped 70 basis points (bps) to 14.8% during the
quarter, attributable to a spike in labor expense and investment in
local advertising, partially compensated by refranchising of lower
margin restaurants and higher traffic.
During the fourth quarter, DineEquity opened 12 and closed 3
Applebee's franchised restaurants. The company also opened 16 IHOP
franchised restaurants as well as three area licensed restaurant
and shut down 1 franchised unit. At the end of the quarter,
DineEquity had 2,019 Applebee's and 1550 IHOP restaurants.
In the fourth quarter, the company successfully completed the
refranchise and sale of 66 company-operated Applebee's restaurants
located in New England and for the first quarter of 2012,
DineEquity expects to refranchise and sell 17 Applebee's
company-operated restaurants located in six-state markets around
Tennessee. These are in line with the company's strategy of
transitioning to a franchise based model.
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 $60.7 million and shareholders' equity of $155.2
The company is in a deleveraging mode. In 2011, the company has
reduced term loan balances by $161.5 million, retired $59.3 million
of the 9.5% senior notes and $87.9 million of financing and capital
lease obligations. DineEquity has reduced long-term debt, less
current maturities from $1.6 million in 2010 to $1.4 million in
The largest full-service restaurant company in the world expects
Applebee's domestic system-wide comparable store sales in the range
of 0.5% to 2.5% for fiscal 2012. The company also expects domestic
system-wide same-store sales 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, menu innovation,
operational improvements and remodel program. Moreover with about
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. Additionally, domestic
systemwide same-restaurant sales of IHOP has improved sequentially
for two quarters, but still comps remain in the red and the company
still has a long way to go.
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 (
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