Applebee's and IHOP parent suffers rare profit miss as consumers remain cautious

By Tomi Kilgore

Stock falls as same-restaurant sales for both Applebee's and IHOP chains fall more than expected

Shares of Dine Brands Global Inc. bounced back Wednesday, after the parent of the Applebee's and IHOP restaurant chains missed earnings expectations, citing poor weather and a cautious consumer, but kept is full-year outlook intact.

While same-restaurant sales for both Applebee's and IHOP fell more than expected in the latest quarter, the outlook for full-year growth remained intact, as Chief Executive John Peyton said the company is planning to meet customers' need for "abundant value" through upcoming campaigns and new menu items.

The stock (DIN) was had dropped as much as 4.2% to a four-year low in intraday trading, before reversing course to trade up 0.2% in midday trading.

The company reported net income that fell to $17 million, or $1.13 a share, from $26.7 million, or $1.74 a share, in the same period a year ago.

Excluding nonrecurring items, adjusted earnings per share of $1.33 missed the FactSet consensus of $1.56. That snapped a 12-quarter streak of bottom-line beats.

Revenue was down 3.5% to $206.2 million, below the FactSet consensus of $210.5 million.

Same-restaurant sales, or sales of restaurants open more than a year, dropped 4.6% at Applebee's, compared with the FactSet consensus of a 2.7% decline. Same-restaurant sales for the chain have declined - and missed expectations - for four straight quarters.

Peyton noted, however, on the post-earnings call with analysts, that as a result of effective marketing and promotional campaigns, sales "steadily improved" throughout the quarter.

For IHOP, same-restaurant sales were down 1.7%, the first decline in 12 quarters, to miss expectations of a 0.7% drop.

"During the first quarter, like others in our industry, we saw large areas of the country experience poor weather impacting sales and traffic and consumer caution with respect to economic conditions persisted in the post-holiday period," said Chief Executive John Peyton, according to an AlphaSense transcript of a call with analysts. "As a result, the consumer has become more price-sensitive as indicated by the response to our limited time promotions."

As an example, Peyton said at Applebee's, 28% of first-quarter transactions were tied to a "limited-time offer" for promotion, compared with 19% in the previous quarter and last year.

"We also continue to see guests trade down from higher priced items at both IHOP and Applebee's. Another indicator that guests are managing their wallet," Peyton said.

For 2024, the company still expects Applebee's same-restaurant sales to be flat to up 2%, compared with the current FactSet consensus of 0.6% growth. For IHOP, same-restaurant sales are still expected to be up between 1% and 3%, compared with current expectations of a 1.4% rise.

"While we are not content with the start of the year, we are encouraged by the response of our value offerings and targeted promotions which drove improved performance as the quarter progressed," said CEO Peyton.

Dine Brands' stock has dropped 12.1% to date in 2024, while the S&P 500 index has gained 8.7%.

-Tomi Kilgore

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05-08-24 1145ET

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