UPDATE 4-DineEquity boosts Applebee's outlook; shares up

Tue May 3, 2011 2:36pm EDT

* Q1 adj EPS $1.42 vs Street view $1.16

* Raises Applebee's 2011 same-restaurant sales target

* Shares up 4.4 percent (Recasts first sentence, adds executive and analyst comments; updates share activity)

By Lisa Baertlein

LOS ANGELES, May 3 (Reuters) - DineEquity Inc (DIN.N) raised a key full-year sales target for its Applebee's restaurant chain as an increase in visits to franchised outlets boosted results, and shares jumped 4.4 percent.

The bar and grill chain has posted nine consecutive monthly increases in same-restaurant sales and those results suggest that DineEquity has successfully turned around the business at Applebee's, which it bought in a $2 billion leveraged buyout in 2007.

Applebee's closely watched sales at established restaurants increased 3.9 percent during the first quarter.

Citing that result and the three-month trend, DineEquity upped its same-restaurant sales forecast at Applebee's to an expected rise of 2 to 4 percent. It previously forecast an increase of 1 to 3 percent.

Without giving specific numbers, DineEquity Chief Executive Julia Stewart said traffic increased at franchised Applebee's restaurants at all meal times in every month during the first quarter. Traffic was down at company-owned Applebee's units.

"We are outperforming all of our direct competitors in bar and grill and casual dining," Stewart told Reuters.

When asked if improving industry trends were lifting Applebee's results, she said: "That's about us. That's about all we're doing."

Applebee's same-restaurant sales gain in the first quarter outpaced the industry's 2 percent rise and the chain has been "a clear market share gainer for three consecutive quarters," Raymond James analyst Bryan Elliott said in a client note.

DineEquity's results landed almost a week after rival Brinker International Inc (EAT.N) reported a quarterly profit that also beat Wall Street estimates and posted a long-awaited increase in visits to its Chili's Grill & Bar chain. [ID:nN27299759]

Applebee's contributes about two-thirds of DineEquity's income before interest, taxes, depreciation and amortization.

DineEquity recently updated the menu at Applebee's, expanding its offering for diet-conscious customers with its Weight Watchers offerings. Its "Two for $20" and all-you-can-eat offer on soups and salads did well, too.

On the other hand, IHOP same-store sales fell 2.7 percent during the first quarter, as a decline in visits offset the benefit of diners spending more per meal.

An "All You Can Eat Pancakes" limited-time deal produced disappointing results early in the quarter, but a new "Chicken & Waffles" special introduced mid-quarter produced promising results, the company said.

Stewart also said IHOP frozen breakfasts, including stuffed French toast, would debut at 3,000 Wal-Mart Stores Inc (WMT.N) locations this quarter under a new, nonexclusive licensing deal. She declined to give additional terms at this time.

For the first quarter, Glendale, California-based DineEquity's net income more than doubled to $28.1 million, or $1.53 per share.

Excluding items, earnings were $1.42 per share, handily topping the analysts' average estimate of $1.16, according to Thomson Reuters I/B/E/S.

Shares of DineEquity were up 4.4 percent at $51.99 in afternoon trading, while Brinker shares slipped 1.5 percent to $23.62. (Reporting by Lisa Baertlein and Nivedita Bhattacharjee; Editing by Gopakumar Warrier, Lisa Von Ahn and Matthew Lewis)

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