Dining out can be a short getaway from the everyday hustle. But today, that simple joy is also a cost-cutting opportunity.
Dine Brands Global Inc., owner of Applebee’s and IHOP restaurant chains, is the latest to witness the pullback after it reported first quarter earnings that revealed diners are postponing dinner plans and ordering strategically when they’re out.
“Consumer caution with respect to economic conditions persisted following the holiday period and as a result the consumer has become more price sensitive,” said John Peyton, Dine Brands’ CEO, during the company’s earnings call on Wednesday.
“We continue to see guests trade down from higher priced items at both Applebee’s and IHOP, another indicator that guests are managing their wallet,” Peyton said during the call.
The California based-Dine Brands reported a decline in revenue, which also missed Wall Street’s expectations. For the first quarter, it reported $206.2 million, about $1.33 earnings per share. Analysts expected it would generate $210.5 million, approximately $1.56 earnings per share, according to FactSet.
That decline was largely led by a decrease in traffic and an increase in menu pricing at both Applebee’s and IHOP, the company said in its 10-K filing.
At Applebee’s, sales declined by 4.6% during the first quarter. Meanwhile, sales at pancake maker IHOP fell by 1.7%, which the company said was partially offset by an increase in the average check size, thanks to higher prices.
The restaurant company operator reiterated its sales outlook for the full-year for Applebee’s and IHOP.
For 2024, Dine Brands’ expects Applebee’s sales will be flat and up to 2%. For IHOP, it expects sales to be in the range of 1% and 3%.
Vince Chang, Dine Brands’ CFO said during the company’s earnings call that while first quarter results “reflect the impact of consumer price sensitivity and challenging weather conditions,” the company’s “fundamental business model remains steady despite its brands being tested through many economic cycles in the past decades.”
Peyton said that the company plans to “reach guests where they are” through new menu items, including a focus on boneless wings, “off-premise” delivery, its digital app, as well as upcoming campaigns, including its partnership with the NFL.
Shares of Dine Brands were slightly up in afternoon hours, trading at $44.