Shares of DineEquity Inc., which operates IHOP and Applebee's, dropped to a new low after the company reported mixed same-store sales results for the second quarter and lowered its expectations for sales at Applebee's for the year. DineEquity said its same-store sales, or sales at stores open at least a year, rose 2.6 percent systemwide at IHOP, but fell 1.7 percent systemwide at its Applebee's chain.
The sale-leaseback agreements reduce DIN's consolidated funded debt by $303 million
IHOP restaurant sales increased 7.9% in Q1 2008, and comparable store sales increased 3.7% during the quarter, marking 21 consecutive quarters of positive comparable store sales for DIN's IHOP concept.
Q4 2007 earnings highlighted a 9.3% increase in IHOP franchise operations profitability, which the company mainly attributed to a 3.7% increase in comparable store sales and a 3.5% increase in the amount of IHOP restaurants. Net income did however total at a loss of $480,000, primarily because of costs associated with the acquisition of the Applebee's concept during 2007.
DIN acquired Applebee's for approximately $2 billion. DIN plans to use Applebee's and its more than 3,250 restaurants as a complement for its IHOP concept and plans to begin an extensive refranchising initiative for Applebee's in order to increase its operating margin.
DIN announced plan for an all-cash acquisition of Applebee's for approximately $25.50 per share. Applebee's expansive restaurant system offers a high growth opportunity for DIN to complement its IHOP concept.