Casual restaurant chain Dine Brands (NYSE:DIN) fell short of analysts' expectations in Q1 CY2024, with revenue down 3.5% year on year to $206.2 million. It made a non-GAAP profit of $1.33 per share, down from its profit of $1.97 per share in the same quarter last year.

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Dine Brands (DIN) Q1 CY2024 Highlights:

• Revenue: $206.2 million vs analyst estimates of $210.5 million (2% miss)

• EPS (non-GAAP): $1.33 vs analyst expectations of $1.58 (15.7% miss)

• Full year guidance reiterated for Applebee's and IHOP same-store sales

• Gross Margin (GAAP): 47.2%, down from 48.9% in the same quarter last year

• Free Cash Flow of $29.74 million, down 36.2% from the previous quarter

• Same-Store Sales were down 4.6% year on year

• Store Locations: 3,445 at quarter end, decreasing by 18 over the last 12 months

• Market Capitalization: $673.4 million

“While we are not content with the start of the year, we are encouraged by the response of our value offerings and targeted promotions which drove improved performance as the quarter progressed,” said John Peyton, chief executive officer,

Operating a franchise model, Dine Brands (NYSE:DIN) is a casual restaurant chain that owns the Applebee’s and IHOP banners.

Sit-Down Dining

Sit-down restaurants offer a complete dining experience with table service. These establishments span various cuisines and are renowned for their warm hospitality and welcoming ambiance, making them perfect for family gatherings, special occasions, or simply unwinding. Their extensive menus range from appetizers to indulgent desserts and wines and cocktails. This space is extremely fragmented and competition includes everything from publicly-traded companies owning multiple chains to single-location mom-and-pop restaurants.

Sales Growth

Dine Brands is a mid-sized restaurant chain, which sometimes brings disadvantages compared to larger competitors benefiting from better brand awareness and economies of scale. On the other hand, Dine Brands can still achieve high growth rates because its revenue base is not yet monstrous.

As you can see below, the company's revenue was flat over the last five years as it didn't open many new restaurants.

This quarter, Dine Brands missed Wall Street's estimates and reported a rather uninspiring 3.5% year-on-year revenue decline, generating $206.2 million in revenue. Looking ahead, Wall Street expects sales to grow 2.4% over the next 12 months, an acceleration from this quarter.

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Same-Store Sales

Dine Brands's demand within its existing restaurants has been relatively stable over the last eight quarters but fallen behind the broader sector. On average, the company's same-store sales have grown by 1.3% year on year. Given its flat restaurant base over the same period, this performance stems from increased foot traffic or larger order sizes per customer at existing locations.

In the latest quarter, Dine Brands's same-store sales fell 4.6% year on year. This decline was a reversal from the 7.2% year-on-year increase it posted 12 months ago. We'll be keeping a close eye on the company to see if this turns into a longer-term trend.

Key Takeaways from Dine Brands's Q1 Results

Dine Brands's revenue and EPS unfortunately both missed analysts' expectations. While the company did reiterate its previous full year guidance, we consider this a mediocre quarter. The company is down 1.5% on the results and currently trades at $43 per share.

Dine Brands may have had a tough quarter, but does that actually create an opportunity to invest right now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it's free.