IHOP owner's earnings hobbling back

DOWNTOWN — DineEquity Inc., the Glendale-based owner of IHOP Restaurants and Applebee’s Neighborhood Grill & Bar, on Wednesday reported earnings of $31-million for 2009, bouncing back from a $154-million loss the year prior.

The family-dining giant has more than 3,400 franchise or company-owned restaurants and employs 225 people at its headquarters and 1,000 nationwide. The majority of IHOP and Applebee’s employees work for franchisees, according to DineEquity.

The company’s gains came largely because of reduced costs through increased efficiency and the sale of 110 company-owned Applebee’s eateries since mid-2008, said Julia Stewart, chairwoman and chief executive of DineEquity.

“While 2009 was an unprecedented year in terms of macroeconomic challenges, we stayed true to our core strategies to optimize the performance of our business,” Stewart said in a conference call with investors. “This allowed us to meet and, in some cases, exceed our performance guidance for the full year.”

DineEquity’s stock rose nearly 15% on news of the results, to a high of $33.94 in midday trading Wednesday.

Despite the improved earnings, existing-store sales for IHOP restaurants fell 0.8% in 2009, including a 3.1% drop in the fourth quarter, the company said.

Sales at Applebee’s restaurants, also excluding new locations, fell 4.5% in 2009 and in the fourth quarter.

The drops in IHOP business, despite the restaurant’s low-priced menu items, were troubling, Stewart said.

“While we were disappointed with IHOP’s same-store sales performance, we have plans in place aimed at regaining momentum in 2010,” she said.

Applebee’s restaurants, which gained ground as a result of a television marketing campaign for its “2 for $20” meal offer on ESPN’s Monday Night Football, should also benefit from aggressive plans to gain market share in 2010, Stewart said.

DineEquity plans to introduce new menu items at both restaurant chains and will initiate remodels at several locations to help attract more customers, she said.

“I don’t care if you come in and don’t eat it,” she said of new menu items advertised in TV ad campaigns. “I care that you came in and you had renewed interest in the brand. That’s what new news does. It gives people a reason to visit.”

The company’s performance was mixed when compared with the restaurant industry in general, according to the National Restaurants Assn.

Restaurant sales were down 2.9% last year and 1.2% in 2008, according to the association, which projected flat earnings in 2010.

DineEquity executives projected that sales would improve as they ramped up marketing efforts and as consumer confidence improved.

About one-third of consumers say they are not eating out as much as they would like, resulting in “pent-up demand” that could spring gains in the industry, Annika Stensson, a spokeswoman for the association, said in an e-mail.

“The consumer is hamstrung with this household wealth issue that they’re suffering,” said Harry Balzer, vice president of consumer research firm the NPD Group. “It’s not that they want to cook more. If there’s a deal at a rest people are still going out.”

That is where food service businesses have made progress with special promotions, like those from Subway and Applebee’s, Balzer said.

“They’ve been very successful with that and that was not lost on everyone else in the industry because, again, I think the mantra is how consumers can contain food costs without cooking more,” he said. “They’re not looking to make things from scratch at their house.”


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