IHOP parent loses key exec
The sudden departure of the chief financial officer and key strategist of the Glendale company that owns the Applebee’s and IHOP restaurant chains sent shares of DineEquity Inc. tumbling 26% on Tuesday.
Late Monday, DineEquity said Thomas Conforti was leaving the firm immediately to pursue “other opportunities.” He was replaced by Controller Greggory Kalvin while the restaurant chain conducts a search for a new CFO.
The surprise resignation spooked investors. Shares of DineEquity plunged $6.20 to close at $17.77 on Tuesday.
Conforti left only 10 months after helping Chief Executive Julia Stewart engineer the $1.9-billion acquisition of the casual-dining Applebee’s chain by what was then called IHOP Corp. The company changed its name to DineEquity so that it would not be associated with only one of its restaurant brands.
“This was clearly a surprise,” said Michael Gallo, an analyst at C.L. King in New York.
Gallo said Conforti was seen as Stewart’s partner in executing and managing the Applebee’s transaction and his departure made investors nervous.
“The timing of this does not make it look like this was planned,” Gallo said. Although it’s still early, the Applebee’s acquisition has not gone as investors anticipated, he added.
In a report to investors, JPMorgan analyst Steven Rees called the departure “negative and ill-timed.”
The analyst wrote that Conforti was well regarded on Wall Street, where the financial community “appreciated his conservatism and found him to be a good fit/balance with CEO Stewart.”
In recent months, the sluggish economy has hurt the restaurant industry.
People are eating out less because they are spending money they once might have used for a restaurant meal on higher grocery and gasoline bills.
DineEquity’s plan was to sell off most of the 483 company-owned Applebee’s locations to franchisees, Rees said, but the company has completed only 26 transactions and “has a long way to go to reach its 100-unit goal by year end.”
Gallo said the tough credit environment had made it hard for potential franchisees to get the financing to complete transactions.
At the same time, Applebee’s financial results have come in weaker than expected, the analyst said.
DineEquity took on a massive amount of debt to buy Applebee’s. The company’s long-term debt ballooned from $175 million in mid-2007 to nearly $2 billion as of June 30.
As its interest payments surged in the first half, the company lost $5.3 million from continuing operations, compared with a profit of $25.4 million in the same period of 2007.
Even before Conforti’s departure, investors were increasingly uneasy about DineEquity’s prospects. Through Aug. 31, the shares were down 46% from the end of last year, one of the worst performances of any major restaurant stock.
A DineEquity spokesman said the company as a matter of policy does not comment on swings in stock price. He described Conforti’s parting as “amicable” but otherwise did not elaborate.
In a statement announcing Conforti’s resignation Monday, CEO Stewart called him “a great professional” and “valuable partner in positioning IHOP and now DineEquity for long-term success.”
DineEquity franchises and operates more than 3,300 restaurants under the Applebee’s Neighborhood Grill & Bar and IHOP brands and claims to be the largest full-service restaurant company in the world.
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Times staff writer Tom Petruno contributed to this report.
