IHOP’s Net Income Declines 14%

Investors were expecting a little more syrup in the second-quarter earnings of Glendale-based restaurant chain IHOP Inc. Instead, they got less.

IHOP’s net income fell 14% to $10.3 million, or 56 cents a share, from $11.9 million, or 60 cents a share, during the same period a year earlier. Part of the decline resulted from a requirement that the company expense the value of $1.1 million in stock-based compensation for its executives.

IHOP’s revenue rose 3% to $85.1 million from $82.9 million a year earlier, helped by an increase in the number of customers visiting its restaurants, the company said. Same-store sales, an important measure of a restaurant chain’s health, rose 3.1% in the quarter, IHOP’s 14th consecutive quarter of positive same-store sales growth.

“We are pleased to be able to drive this level of growth in the face of a very difficult consumer spending environment, and at a time when our closest competitors -- and the industry at large -- are generally experiencing weaker sales results,” Julia Stewart, IHOP’s chairman and chief executive, said in a conference call with investors.

The earnings slip surprised Wall Street, and IHOP’s share price declined $1.89, or 4%, to $45.66. Industry analysts surveyed by Thomson Financial had expected on average a profit of 60 cents a share.

IHOP’s share price also was hurt by a variety of negative news from other restaurant chains Wednesday, said Michael Gallo, an analyst with C.L. King & Associates Inc. in New York.

“There’s no doubt that consumers are under pressure from higher gas prices and rising adjustable mortgage rates,” Gallo said.

Applebee’s International Inc. of Overland Park, Kan., said its same-store sales fell 1.8% in the second quarter. Applebee’s earnings dropped 26% to $20.4 million in the second quarter from $27.5 million a year earlier.

And P.F. Chang’s China Bistro Inc., said that it expected its same-store sales to be flat or negative for the rest of the year. The restaurant company, based in Scottsdale, Ariz., also reported that its second-quarter net income fell 13% to $8.1 million from $9.3 million.

Earlier this month, Denny’s Corp., IHOP’s biggest rival, said its same-store sales fell 0.4% in the second quarter. The Spartanburg, N.C.-based chain also said it saw a 4.2% decline in guest traffic during the period.