Is Dine Brands Stock a Buy?
COVID-19 has turned the part of the economy that relies on in-person interaction on its head, and the restaurant industry has been hit particularly hard. Things are starting to normalize, but many brands have a long way to go to full recovery -- and some may never be the same. That's the boat Applebee's and IHOP parent Dine Brands Global (NYSE: DIN) finds itself in. The two familiar casual chains are reporting recovering traffic, but a high load of debt and shifting trends make me think there are better restaurant stocks.
Applebee's and IHOP illustrate just how severe the effects of the economic lockdown have been on restaurants. During the first week of April, which kicked off the company's 2020 second quarter, comparable-store sales (or comps, an average of foot traffic and guest ticket size) were down 77.0% at Applebee's and 81.5% at IHOP compared to a year ago. As the economy has slowly reopened, guests have come streaming back, but as of the week ended July 26 (about one month into Dine Brands' third quarter), Applebee's and IHOP's comps remain down 15.6% and 35.0%, respectively, from the same week in 2019.
To the company's credit, its franchisees were able to pivot to off-premises sales (pick-up and delivery), which made up 60.5% of total revenue in the second quarter, compared to just 13% of the mix during the final quarter of 2019. Nevertheless, revenue tumbled 52% to $110 million, and the bottom line swung to an adjusted loss of $14 million, compared to adjusted income of $30.0 million last year. To shore up its cash flow, the company had to suspend its dividend payment.
Source Fool.com
