GLENDALE, CALIF. — Sustained off-premises traffic and continued recovery of dine-in boosted comparable restaurant sales at Applebee’s and IHOP in the second quarter. Parent company Dine Brands Global, Inc. said both brands delivered average weekly sales above pre-pandemic levels in the three-month period.
Net income at Dine Brands Global in the second quarter ended June 30 was $24 million, equal to $1.45 per share on the common stock, down from $29.4 million, or $1.70 per share, in the same period a year ago. Company restaurant sales grew 3% to $39.5 million from $38.2 million.
Same-restaurant sales at Applebee’s increased 1.8% year-over-year, with off-premises sales accounting for 25.6% of sales mix. Same-store sales at IHOP increased 3.6% in the quarter. Off-premises sales accounted for 21.3% of sales mix.
Total cost of revenue increased 5.5% to $142.1 million, with gross profit as a percentage of revenue shrinking to 40.2% from 42.3%. Dine Brands experienced a 22% rise in commodity costs during the quarter. Management expects commodity cost inflation to ease to the low-teens for Applebee’s and the mid-teens for IHOP during the back half of the year.
Inflation, gas prices and other economic concerns affected the mix of consumers visiting the company’s restaurants. Applebee’s and IHOP saw similar changes in frequency across certain demographics.
“We experienced some weakening consumer sentiment to varying degrees in each brand, consistent with the economy’s overall slowing momentum,” said John Peyton, chief executive officer of Dine Brands Global, during an Aug. 9 conference call with financial analysts. “We’re seeing a slight decline in guests in the $50,000 and below household income cohort. We assume they’ve left us to look for lower cost options.”
The $50,000 to $75,000 household income cohort was flat, while the $75,000 plus cohort was up between 6% and 8%, he added.
“This suggests to us that guests who often dine at more expensive restaurants are finding Applebee’s and IHOP because of their well-known value proposition,” Mr. Peyton said.
Average check has remained steady amid price increases at both brands. On a national basis, Applebee’s franchisee prices were about 7% higher in the second quarter than they were a year ago. IHOP’s franchisee prices were up approximately 10%.“We’re not seeing evidence yet of major check management once guests are at the restaurant,” Mr. Peyton said.