Applebee’s leads DineEquity to fourth-quarter profit; IHOP slips

DineEquity Inc., the Glendale-based owner of the Applebee’s and IHOP restaurant chains, had a strong fourth quarter after suffering a severe slump a year earlier.

Several factors helped the recovery, including the company’s franchising strategy, warmer weather that drew out more diners and remodeling efforts that have freshened up hundreds of Applebee’s locations.

Net income for the quarter ended Dec. 31 jumped to $27.3 million, or $1.51 cents a share, from a loss of $58.1 million, or $3.33 cents a share, from the fourth quarter of 2010. Sales were still down, however, slipping 19.3% to $242.2 million from $300 million in the same quarter a year prior.

Applebee’s proved a highlight for the company, with sales at locations open more than a year up 1% compared with the fourth quarter of 2010. Chief Executive Julia A. Stewart attributed the boost to Applebee’s late-night crowds and record alcohol sales. DineEquity bought the casual sit-down brand for $2 billion in 2007.

And selling off 132 Applebee’s to franchisees helped DineEquity cut its debt 15%. The company’s restaurants are now 95% franchise-owned, a model that Stewart said “requires less capital investment and reduces the volatility of the company’s cash flow.”

There are more than 2,000 Applebee’s across the U.S. and in 16 other countries.

IHOP, however, continued to perform weakly, with same-store sales down 1% despite new menu offerings that focused on value. Stewart acknowledged that, as a segment, family dining is “sort of flat.”

Gift card sales for the chain hit record levels, however, spiking 51% to $32 million for the full fiscal year.

Executives said IHOP’s 1,400 locations would shift away from limited-time specials and focus instead on longer-term offerings.

“Clearly, IHOP is still not where we wanted to be, but we’re seeing some progress,” Stewart said in a conference call with analysts.

Over the full fiscal year, DineEquity’s revenue slipped 19.4% to $1 billion from $1.3 billion in 2010 . But the company pulled in $75.2 million in profit, or $3.89 a share, after enduring a $2.8-million slump, or a loss of $1.74 a share, the previous year.

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