IHOP boosts its profits

Mark Humphrey

IHOP Corp., owner and franchiser of the International House of

Pancakes restaurants, announced Thursday that its second-quarter

profits nearly tripled from last year due to lowered operating costs.

“We’re pleased with our financial performance for the quarter and

feel it reflects our commitment to manage general and administrative

costs more aggressively,” said Stacy Roughan, Director of Investor

and Government Relations for the Glendale-based IHOP Corp.

For the second quarter of 2005, IHOP’s net income rose to $11.9

million, or 60 cents a share, from $4.37 million, or 21 cents a

share, in the same period last year. During this same period,

however, revenue actually fell 3.8% to $82.9 million.

In spite of this “modest sales performance” in the first half of

2005, Roughan said the corporation’s overall profitability increased

due to expense control that has allowed the company to have a steady

cash flow.

This profit increase for the second quarter came at a time when

IHOP Chief Executive Julie Stewart lowered general and administrative

expenses by 11% for the quarter, allowing profits to increase in the

absence of larger operating costs. As a result, analysts were

surprised when the decreased general and administrative costs led to

the nearly three-fold surge in profits, as analysts had only expected

the corporation to earn 51 cents a share rather than 60.

Business analyst Mike Gallo, of C.L. King & Associates in New

York, downplayed the news of the IHOP’s huge profit increase,

however.

“I don’t think you’ll see this happen again,” Gallo said. “General

and administrative costs were actually lower than the company

indicated due to the heavy focus on controlling expenses and other

factors like reversed bonus accruals and legal credits.”

Following IHOP’s announcement about its net income increase,

shares in the corporation rose by $3.86 to $43.70, an increase of

nearly 10%, at the close of the New York Stock Exchange.