Texas Roadhouse Outshines Applebee's in Fight for Casual Diners
(Bloomberg) -- In the hard-fought battle for casual-dining customers, Texas Roadhouse Inc. is outshining rivals such as Applebee’s and IHOP.
Shares of the steak-restaurant chain surged to a record high on Tuesday after first-quarter sales topped analysts’ estimates, renewing optimism that the company can overcome a broader slump.
DineEquity Inc. wasn’t so fortunate. The company, which owns both Applebee’s and IHOP, suffered its worst stock decline in two months after earnings fell short of projections. Sales at both of its major chains came in below estimates.
The divergent results reflect the hit-or-miss nature of the U.S. restaurant industry right now. Overall sales are down -- they slipped for a fourth straight month in March -- but there are bright spots. McDonald’s Corp., for instance, posted a surprisingly strong first-quarter performance after its Big Mac overhaul helped attract diners.
Revenue at Texas Roadhouse rose 10 percent to $567.7 million last quarter, the Louisville, Kentucky-based company said on Monday. Analysts projected $560.7 million on average. Its same-store sales at company-owned restaurants also topped estimates, climbing 3.1 percent last quarter. The gains -- including traffic growth -- continued in the first four weeks of the current period, Chief Executive Officer Kent Taylor said.
Many other sit-down chains are struggling to attract customers and even closing locations. Ruby Tuesday Inc., for instance, put itself up for sale after a prolonged slump torpedoed the company’s results.
In its bid to turn things around, Applebee’s recently hired a new ad agency. It’s also working on new culinary options that can revive an aging brand.
Texas Roadhouse shares rose as much as 11 percent to $51.22 on Tuesday. DineEquity, meanwhile, fell as much as 6.3 percent to $53.01, its biggest intraday drop since March 1.
“There appears to be a bifurcation of haves and have-nots in the casual-dining space,” said David Palmer, an analyst at RBC Capital Markets.
Excluding some items, DineEquity’s profit was $1.22 a share last quarter. That trailed analysts’ estimates for $1.24. Comparable-store sales dropped 7.9 percent at Applebee’s and 1.7 percent at pancake chain IHOP.
Texas Roadhouse earnings per share fell 4 percent to 48 cents, but it included a 13-cent charge related to a legal matter settled in March.
The casual-dining chain, which offers steaks, burgers and ribs, plans to open 30 restaurants this year, including six under its Bubba’s 33 brand, Taylor said. The company also will be introducing new menus soon with some smaller portion entrees to better accommodate diners.
“We credit our success to our operators’ ability to execute on our mission,” he said. “In addition, we remain committed to investing in new restaurant growth that generates solid returns.”