DineEquity's Applebee's Seeks Helpings Of Rivals' Share
October 29 2010 - 01:19PM
Dow Jones News
DineEquity Inc.'s (DIN) Applebee's chain is tailoring marketing
plans to try to steal business from competitors during each part of
the day, from lunch and dinner to late-night and takeout, Chairman
and Chief Executive Julia Stewart said.
With expansion opportunities limited in casual dining,
especially in the bar-and-grill segment that Applebee's operates
in, winning customers from competitors is paramount for increasing
sales, Stewart said.
"More than ever, it's a share war," Stewart said late Thursday
during a phone interview.
Applebee's strategy to develop specific marketing plans for each
business line paints a bull's eye, chiefly on mom-and-pop
restaurants but also some of its chief chain competitors, like
Brinker International Inc. (EAT) Chili's Grill and Bar and
privately held T.G.I. Friday's. DineEquity is also laying a
challenge for others to defend their turf, like Buffalo Wild Wings
Inc.'s (BWLD) bar and late-night business.
"There are some particular chains that might get hurt from us,
but the independents are taking the largest hit," Stewart said.
Applebee's is emboldened after DineEquity spent the last three
years revitalizing the brand since it was combined with IHOP in a
$2.1 billion deal. Among the changes have been retooled marketing,
leaner operations and more new menu items, including additions like
meals with under 550 calories and "Sizzling Skillet" meals during
2010.
Last month, DineEquity said same-store sales rose 2.7% at
Applebee's and 0.3% at IHOP through the majority of its
third-quarter. The preliminary results were ahead of analysts'
expectations at the time. DineEquity reports results for the
quarter Tuesday, with analysts most recently polled by Thomson
Reuters expecting per-share earnings of 68 cents, up from 55 cents
last year.
Stewart declined to comment ahead of next week's report as to
whether the improved sales at Applebee's were sustainable, but she
ascribed the recent lift mostly to what the company has done rather
than the improving economy.
"What you are seeing is the direct result of the efforts we put
into play," Stewart said.
Stewart said Applebee's sales are coming with less discounting,
too. Applebee's instead is developing meals that it can sell at low
prices while preserving profit.
"Our direct competitors are discounting existing products to get
you in the door," she said. "Applebee's hasn't been doing that for
almost two years."
The improved sales at Applebee's have come as DineEquity has
taken steps to reduce the overhang from a highly leveraged model,
including refinancing $1.8 billion of debt that pushed out
maturities until 2018 from 2012, and announcing pending deals to
sell 149 more company-run stores to franchisees. The latest deals
would push the company past the halfway mark toward its plan to
sell nearly all 500 company-owned Applebee's to franchisees.
"We have interested parties for the large majority of what's
left," Stewart said. "It's just getting the right buyer, valuation,
financing."
The actions boosted DineEquity shares, which have nearly doubled
over the past 12 months, though they have retreated on concerns
over valuation. Recently, share traded at $43.67, losing more than
13% since Oct. 18, when Morgan Keegan downgraded shares to market
perform from outperform because of the recent run-up.
-By Paul Ziobro, Dow Jones Newswires; 212-416-2194;
paul.ziobro@dowjones.com
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