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Dine Brands Global Inc (DIN) Q1 2024 Earnings Call Transcript Highlights: Navigating Economic ...

GuruFocus Research
·4-min read

  • Revenue: Decreased by 3.5% in Q1.

  • EBITDA: $60.8 million in Q1, down from $66.4 million in the previous year.

  • Net Income: Not specifically mentioned, but adjusted diluted EPS was $1.33 in Q1, down from $1.97 year-over-year.

  • Free Cash Flow: Adjusted free cash flow was $29.7 million, up from $2.3 million in the previous year.

  • Same-Store Sales: Applebee's down 4.6%, IHOP down 1.7%.

  • Store Locations: Net closure of 2 restaurants internationally; domestically, Applebee's had net closures of 5, IHOP had net closures of 4.

Release Date: May 08, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

  • Dine Brands Global Inc (NYSE:DIN) saw a positive guest response to limited-time offers (LTOs) and menu innovations, which helped mitigate economic challenges in Q1.

  • Applebee's outperformed Black Box traffic in Q1, showing improvement in brand performance throughout the quarter.

  • IHOP maintained a steady flow of timely, relevant campaigns, helping to offset modest weather-related headwinds and economic pressures.

  • The introduction of new virtual brands at IHOP and strategic promotions at Fuzzy's are expected to support incremental sales growth.

  • Dine Brands Global Inc (NYSE:DIN) remains committed to its full-year guidance despite a slow start, indicating confidence in their strategy and operational plans.

Negative Points

  • Dine Brands Global Inc (NYSE:DIN) experienced a 3.5% decrease in revenues and a decline in EBITDA from $66.4 million in Q1 2023 to $60.8 million in Q1 2024.

  • Applebee's reported a 4.6% reduction in comparable sales, and IHOP posted a negative 1.7% in comparable sales, both showing a downturn from the previous year.

  • Economic conditions have led to increased consumer price sensitivity, impacting transactions and prompting guests to trade down from higher priced items.

  • The closure of the virtual brand partner Nextbite negatively impacted IHOP's year-over-year comparable sales.

  • Dine Brands Global Inc (NYSE:DIN) faced challenges from adverse weather conditions and high pricing from franchisees, particularly affecting Fuzzy's performance in Q1.

Q & A Highlights

Q: Could you discuss the drivers behind the reiteration of the 0% to 2% comp guidance for Applebee's, considering it implies a significant improvement in the coming months? A: John Peyton, CEO, explained that the improvement in Applebee's performance from March into April, along with planned menu innovations, contribute to their confidence in achieving the guidance. Tony Moralejo, President of Applebee's, added that the brand's promotional strategy, which includes compelling value-based promotions and culinary innovation, is expected to resonate well with guests, supporting the positive outlook.

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Q: Can you provide insights into IHOP's promotional strategy and its impact on recent trends? A: Jay D. Johns, President of IHOP, mentioned that IHOP is adjusting its strategy to focus more on price-pointed value promotions, which are crucial during economic downturns. He highlighted the introduction of new virtual brands and a promotional tie-in with a family movie that includes a Kids Eat Free offer, which are expected to drive positive results.

Q: What are the expected pricing strategies for Applebee's and IHOP going forward? A: John Peyton noted that both brands are likely to return to historical price increase levels of 2% to 3% as commodity and labor costs stabilize, moving away from the higher increases seen during the inflationary period.

Q: How is franchisee sentiment currently, especially in light of the increased focus on value menus? A: Vance Yuwen Chang, CFO, indicated that franchisee margins are improving as commodity costs stabilize and labor availability improves. This financial health supports positive franchisee sentiment across both Applebee's and IHOP.

Q: What changes are you observing in customer demographics and behaviors, particularly concerning economic pressures? A: John Peyton remarked that there is a noticeable decrease in visits from lower-income guests, while higher-income guests remain more consistent. This shift underscores the economic pressures faced by lower-income demographics.

Q: Can you discuss the impact of promotional strategies on franchisee profitability, especially with the increase in value-oriented promotions? A: John Peyton assured that promotions are designed to be profitable on their own and drive additional business. He cited the example of DOLLARITA at Applebee's, which, despite its low price, is profitable and typically leads to higher ticket sales with food additions.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.