By Lisa Baertlein
Feb 27 Applebee's and IHOP restaurants owner
DineEquity Inc posted better-than-expected quarterly
profit on Wednesday and announced a generous dividend, sending
its shares up almost 5 percent.
Those two servings of good news helped investors shrug off a
decline in traffic at both Applebee's and IHOP during the fourth
Shares in DineEquity were up $3.46, or 4.8 percent, to
$75.74 in midday trading on the New York Stock Exchange.
Chains ranging from fast-food leaders McDonald's Corp
and Burger King Worldwide Inc to DineEquity
rival Darden Restaurants Inc have signaled lackluster
spending by U.S. diners since the start of the year.
Darden warned on Friday that profits at its Olive Garden and
Red Lobster chains were being squeezed as customers retrenched
because of the Jan. 1 U.S. payroll tax hike and higher gasoline
The recent tax changes have had a "negative impact" on
discretionary spending, but it is too soon to tell what the
duration and magnitude of that will be, DineEquity Chief
Executive Julia Stewart said on a conference call with analysts.
DineEquity was formed following IHOP's $2 billion leveraged
buyout of the Applebee's bar-and-grill restaurant chain in 2007.
The company, which has been selling restaurants to
franchisees, said net income fell 34 percent to $18 million, or
97 cents per share, from a year earlier.
Excluding items, DineEquity earned 83 cents per share in the
quarter ended Dec. 31, slightly above analysts' expectations of
82 cents per share.
Total revenue at DineEquity fell 35 percent to $158.6
million in the fourth quarter, due to restaurant sales to
Fourth-quarter sales at restaurants open at least 18 months
rose 0.9 percent at Applebee's and fell 2.6 percent at IHOP.
Visits to both chains declined during the quarter, when IHOP
diners also spent less per visit.
For 2013, DineEquity forecast U.S. same-restaurant sales at
both Applebee's and IHOP in the range of down 1.5 percent to up
DineEquity separately announced a first-quarter dividend of
75 cents per share of common stock.
The related dividend yield appeared to be one of the best in
both the restaurant and consumer sectors, Janney Capital Markets
analyst Mark Kalinowski wrote in a client note.
Given the stock's nearly 50 percent gain over the last year,
"we view this development ... as a classic 'sell on good
news'-type situation," said Kalinowski, who downgraded
DineEquity shares to "neutral" from "buy."