Restaurant brand manager Dine Brands (DIN -1.39%) is having an interesting 2020, to say the least. The company announced a CEO transition in May, near the peak of the COVID-19 crisis. It took five months to find a replacement for Stephen Joyce, who guided the company through a fairly successful turnaround over the last three years. Now that the corner-office handoff is ready for completion on Jan. 4, the parent company of IHOP and Applebee's is struggling again.
The stock is trading at a discount, 38% below its 52-week highs. Is this a good time to bet on another turnaround under new management?
The new CEO comes with a sterling pedigree. John Peyton has 20 years of executive-level experience in the hospitality business. His resume includes a long stint at the hotels division of Starwood Property Trust (STWD -2.39%) and a shorter run with Century 21 and Coldwell banker parent Realogy Holdings (HOUS -4.34%).
Peyton's deep expertise in real estate and franchising operations points to an upcoming review of IHOP's and Applebee's lease agreements. The company isn't likely to open a whole lot of new locations anytime soon, having closed approximately 200 Applebee's restaurants under Joyce's three-year plan and more than 100 of each brand during the coronavirus crisis. Management expects to close 15 Applebee's stores and fewer than 100 IHOP locations over the next six months.
Meanwhile, Applebee's same-store sales staged a solid recovery in the fall of 2020, but IHOP's revenue trend moved in the opposite direction.
Buy, sell, or hold?
All things considered, I find it difficult to recommend buying Dine Brands shares right now. The low share prices make sense because the company is going through a rough patch right here. You may want to bet on John Peyton righting the ship again. Even that looks like a shot in the dark, though. Peyton is a highly respected business leader, but he has deeper experience with hotels and real estate management than with the restaurant sector.
I think it's best to leave this stock alone for the time being. Give the new management team some time to set up a long-term plan. Take another look when Dine Brands reports its fourth-quarter results near the end of February.