No wonder Applebee’s (APPB) wants to Sell or find more alternatives. We questioned why someone would want to buy this company back on February 13 when the shares were over $27.00. Shares closed up 1% at $25.56 today.
Here was the February comparable sales: System-wide domestic comparable sales Decreased 4.0 percent for February, and comparable sales for domestic franchise restaurants Decreased 3.9 percent. Comparable sales for company restaurants Decreased 4.3 percent; guest traffic Decreased between 5.5 and 6.0 percent after a higher average check. The severe winter weather this year on February system-wide comparable sales is estimated to be approximately 1.5 to 2.0 percent, with company restaurants affected by approximately 0.5 to 1.0 percent and franchise restaurants affected by approximately 2.0 to 2.5 percent.
The company’s P/E is north of 20 and its market cap is $2 Billion. The growth days may be behind it, and if they want a private equity buyer the chances are that the buyer won’t have been a customer. Its balance sheet is in OK shape, but there is just nothing screaming out that this one is cheap or is hiding any resounding unknown values. Shares are also up 50% from the yearly lows and the business appears more matured than it looks problematic.
So, who would acquire this one and why? The shorts aren’t concerned about a buyout, or if they are I would like to ask them why January’s short interest grew from 6.02 million shares to 6.96 million in February.
Jon C. Ogg
February 27, 2007
Jon Ogg is a partner in 24/7 Wall St., LLC and he can be reached at [email protected]; he does not own securities in the companies he covers.
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