DineEquity’s 3Q Same-Store Sales Up – Analyst Blog

DineEquity Inc. (DIN), operating under the Applebee’s Neighborhood Grill & Bar and IHOP brands, announced a preview of its same-store sales results for third quarter 2010. The company indicated that comparable sales in the chain of restaurants under both the brands are on a rising trend.

 

Applebee’s domestic system-wide comparable-store sales spiked up 2.7% for the first eleven weeks ending September 19, 2010, with franchise same-restaurant sales up 3.2% and company-operated comparable restaurant sales up slightly by 0.7% for the same period. The upside in comparable-store sales results was driven by ongoing marketing and new menu offerings aimed at driving the traffic. The company owned restaurants raised prices by 1.2% for the period and experienced a higher average guest check but lower traffic.

 

IHOP’s domestic system-wide same-store sales results inched up 0.3% for the same period due to the promotional offer tied with the animated feature film Despicable Me and its Kids Eat Free promotion in August.

 

Year to date, Applebee’s comparable-store sales dropped 0.8%, while franchise same-restaurant sales declined 0.5% and company-owned comparable restaurants sales fell 2.0%. IHOP’s same-restaurant sales declined 0.4% for the same period.

 

The largest full-service restaurant company in the world continues to expect Applebee’s domestic system-wide comparable-store sales in a range of flat to down 3% for fiscal 2010 and IHOP’s domestic system-wide same-store sales between positive 1% to negative 1%. In fiscal 2010, Applebee’s franchise plans to open 25 to 30 restaurants and IHOP franchisee expects to open 60 to 70 restaurants.

 

However, DineEquity revised the lower end of its general and administrative expense guidance by $1 million for 2010 as a result of higher stock-based compensation charge. The company now expects the G&A expense to range from $159 million to $161 million.

 

We have a Zacks #3 Rank (short-term Hold recommendation) on the shares. We also reiterate our long-term Neutral rating.

 

We have a Zacks #1 Rank (short-term Strong Buy recommendation) on the company’s prime competitors such as Biglari Holdings Inc. (BH), Buffalo Wild Wings Inc. (BWLD) and Krispy Kreme Doughnuts Inc. (KKD).