YTD* -43% NYSE: DIN Glendale A shift in consumer tastes impacts sales, leading to executive turnover. Situation Julia Stewart resigned as chief executive effective March 1. Richard Dahl, a member of the DineEquity board, became interim chief executive while the board began a search for a permanent boss. Two weeks later on March 15, Thomas Emrey resigned as DineEquity’s chief financial officer. Greggory Kalvin, the corporate controller, assumed the role of interim chief financial officer until the selection of a permanent replacement. In terms of performance, net income for the most recent quarter fell 44 percent compared to a year earlier. Sales at the company’s two restaurant brands, IHOP and Applebee’s, declined 1.7 and 7.0 percent respectively during the quarter. The company has launched a number of menu specials and promotions, and in March it hired advertising agency Grey in New York to help turn around the marketing messages for Applebee’s. Grey is the third agency on the account in the last two years. Their Words “I am honored to have led this extraordinary global company through significant periods of growth and transformation over the last 16 years. It has been a privilege to lead two iconic brands, both number one in their respective categories. … I am confident in the strong roadmap that has been set forth, and will continue to cheer for the company’s success.” – Julia Stewart in Feb. 17 statement announcing her resignation “DineEquity will continue to invest in the long-term success and growth of both IHOP and Applebee’s. I will be working very closely with the Applebee’s franchisees to improve performance. While a turnaround of Applebee’s will not happen immediately, the results of a comprehensive diagnostic conducted by a world class management consulting firm has enhanced our understanding of what has driven our recent sales trends. More importantly, we have a go-forward plan to improve performance, and have worked with the same firm to validate our initiatives and identify additional creative strategies.” – Interim Chief Executive Richard Dahl in statement on Feb. 17 announcing his appointment “We couldn’t be more excited to begin working with Grey. In addition to their deep experience, capability and creativity, the team at Grey has a solid understanding of Applebee’s evolving consumer, the brand’s legacy and our goals to ignite change and deliver original and compelling work.” – Interim Senior Vice President of Marketing Jeannine D’Addario in statement on March 13 Analysts & Observers “Secular trends are not in Applebee’s or IHOP’s favor. Younger consumers aren’t eating out that much anymore, as food delivery options have grown in popularity. And when they do eat out, Applebee’s and IHOP aren’t exactly their choice destinations.” – L&F Capital Management, Seeking Alpha “The restaurant industry has suffered in general, but casual sit-down establishments have been punished by consumers the worst of all. This has been decidedly bad news for DineEquity. … Consumers have not stopped wanting to eat out. They just have become more careful with their dollars. If they can eat a satisfying, high-quality meal at Panera Bread or Chick-fil-A for less money than going to a full-service restaurant, they clearly will.” – Daniel Kline, Motley Fool Average Analyst Recommendation: 2.6 1 Strong Buy 2 Buy 3 Hold 4 Underperform 5 Sell Source: Thomson Reuters
