Maybe the elixir that will save struggling casual-dining chains like Brinker International (NYSE:EAT) and Applebee's (NASDAQ:APPB) is sweet, sticky maple syrup. IHOP (NYSE:IHP) continued to defy the malaise bogging down its hotcake-free rivals.
IHOP posted steady first-quarter results this morning. Total revenue inched 2% higher to $90.1 million. Earnings before debt-related charges were flat, though they rose 3% on a per-share basis to $0.70 per share. However, the real gravity-defying feat at IHOP was the sales growth it posted at the store level. Its admittedly meager 0.5% uptick was nonetheless stacked atop a 5.1% prior-year spurt, marking the restaurant chain's 17th consecutive quarter of higher comps.
More conventional casual-dining chains are smarting right now. They serve up scapegoats such as unpredictable weather, higher gasoline prices, and penny-pinching diners to explain their waning store-level popularity. Investors should stomach such excuses about as well as a fifth serving of all-you-can-eat griddlecakes, especially since all of those phenomena seem to have left IHOP unscathed.
In theory, IHOP should have it even harder than the lunch and dinner specialists. Breakfast is the company's batter-and-butter business, and it's getting pretty crowded these days. In addition to the cheaper eats available through McDonald's (NYSE:MCD) and Burger King (NYSE:BKC) for years, Wendy's (NYSE:WEN) and Starbucks (NASDAQ:SBUX) are gradually rolling out breakfast menus, too.
Still, IHOP survives, and its perpetual same-store sales growth should help it grow its franchises and ink more area license deals. That's important, because IHOP owns just 11 of the 1,306 International House of Pancakes restaurants out there. The company relies on franchise fees, rental income, and financing revenues to account for more than 95% of total revenue.
The company expects franchisees to open 61 to 66 new units this year. Earnings should clock in between $2.50 and $2.60 a share for all of 2007, with IHOP expecting comps to inch higher along the way.
IHOP gets it, apparently. So what are you waiting for, Brinker and Applebee's? How about a little buttery maple glaze on those fajitas and deep-fried onions?
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Longtime Fool contributor Rick Munarriz heads out with the family to his nearest IHOP on weekend nights, when the eatery is practically empty. Even though he prefers Original House of Pancakes, the stuffed French toast at IHOP will hit the spot on short notice. He does not own shares in any of the companies in this story. He is part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.
