IHOP Forecasts Higher ’05 Profit

IHOP Corp. said Wednesday that it expected its earnings to rise this year because of stronger sales and new restaurant openings.

The Glendale-based chain of 1,186 family restaurants forecast 2005 per-share profit of $2.02 to $2.12.

“It’s pretty much what we expected,” said Michael Gallo, an analyst with C.L. King & Associates Inc., who estimated the company would earn $2.05.

IHOP said it expected to report 2004 earnings on Feb. 24 of $1.85 to $1.95 a share, excluding a $13-million to $14-million write-off related to the re-franchising or closing of about two dozen poorly performing restaurants.

If the company’s earnings in 2004 and 2005 hit the middle of its projected ranges, year-to-year growth would be about 9%.

Julia Stewart, the company’s chief executive, told analysts during a conference call Wednesday that restaurants that earn a “C” under the company’s rating system will not have their leases renewed, noting that only a handful of leases are up for renewal in 2005.

Currently, about a quarter of the company’s franchise operators carry a “C” designation, with the rest carrying “A” or “B” ratings.

IHOP executives said they based their 2005 forecast on same-store sales growth of 2% to 4% and the opening of 62 to 72 new restaurants, mostly by franchisees.

The company expects to generate $55 million to $65 million this year in cash from operations. An estimated 225 to 250 restaurants are also scheduled to undergo remodels, compared with 65 last year.

The company’s shares rose 24 cents to $44.11 on the New York Stock Exchange. They are up 5.3% this year after gaining 9% last year.