Applebee's slammed on sales drop
By William Spain
Published: May 31, 2006 5:16 p.m. ET
WilliamSpain
CHICAGO (MarketWatch) -- Shares of Applebee's were slapped for a loss of about 4% Wednesday after the restaurant operator reported a slump in same-store sales and said it would have to review it profit projection as a result.
Before the start of trading, Applebee's APPB, +0.00% said that May sales from restaurants open at least a year fell 1.9% system-wide, with a 2% decline at domestic franchise locations and a 1.9% drop at company restaurants. A 5.5% to 6% decrease in guest traffic was partly offset by a higher check, the company said in the sales release.
Applebee's "experienced broad geographic weakness throughout the system during the month, with the most challenging company markets continuing to be New England and parts of Virginia and Michigan," it added. "As a result of the current uncertainty surrounding the macro consumer environment, the company is reevaluating its full year 2006 guidance with respect to comparable sales and earnings per share."
Its previous view for the year was for a profit of $1.26 to $1.30 a share.
"The competition for the bar & grill segment is fierce, and other companies have successfully stepped up . . . , taking away some of Applebee's core customers," wrote Michael Smith of Oppenheimer in a note to investors. "Energy prices also impacted their loyal customer base more dramatically than others as the company has a lower demographic customer that includes more young families."
Shares of Applebee's ended at $20.22, down 3.9% after scraping to a low of $19.77 earlier. The stock hit a 52-week bottom of $19.73 in October; this time last year, it was north of $28.
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