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IHOP Reports a 12% Jump in Profit

October 24, 2003|Karen Robinson-Jacobs | Times Staff Writer

Increased lunch and dinner sales helped IHOP Corp. post a 12% gain in third-quarter profit, the Glendale-based restaurant chain said Thursday.

The parent of the International House of Pancakes restaurants -- best known for their bright blue roofs and breakfast offerings -- posted net income of $11 million, or 51 cents a share, topping Wall Street's estimate by 5 cents a share. A year ago, IHOP earned $9.8 million, or 46 cents a share.

The latest quarterly earnings were reduced by a $1.1-million charge, or 3 cents a share, because of the company's reorganization announced in January.

Total revenue for the quarter was $104.8 million, up 14% over the $92.1 million posted a year ago.

Systemwide sales at IHOP restaurants open at least 18 months rose by 4.7% for the third quarter, boosted by a summer promotion for a new line of sandwiches. Called Super Stackers, the steak, turkey or chicken and bacon sandwiches sell for $6 to $8 and are part of the company's effort to grow its business beyond breakfast.

"The initiative, the new product promotion, all those things are working and working well," said Michael W. Gallo, an analyst with C.L. King & Associates. "Same-store-sales ... continue to outperform the industry."

Investors, encouraged by the earnings report, boosted IHOP's stock by $1.38 on Thursday, to $34.53 on the New York Stock Exchange.

The shares are up 44% so far this year.

The company also increased its earnings guidance for 2003 to $1.65 to $1.75 a share, up from the previous estimate of $1.55 to $1.70.

As part of IHOP's reorganization, the chain has instituted a grading system for franchisees and has begun to weed out weak operators, in some cases going to court to reclaim stores, said Julia A. Stewart, president and chief executive.

Under the new system, operators can be given low marks for being behind in making payments to the company and for slack performance.

"IHOP historically would have looked at the money and nothing else," said Stewart, who took over as CEO in May 2002. "It's a new day."

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