Sector Snap: Restaurants slide

Most restaurant companies begin reporting results next week, beginning with Chuck E. Cheese-operator CEC Entertainment Inc. on Monday.

With consumers spending less of their paychecks for dinner out and commodity costs continuing to skyrocket, analysts are largely predicting a disappointing earnings season.

Analyst Robert M. Derrington said in a note to investors that "the double-whammy of weak top-line growth and escalating operating costs from commodities, labor, and utilities are (again) expected to weigh on restaurant-level margins in the second quarter."

Derrington said although economic stimulus payments have poured into taxpayers' bank accounts and mailboxes since late April, higher gas prices may have convinced consumers to spend the cash at the pump rather than at a local restaurant.

Shares of DineEquity Inc., which operates the IHOP and Applebee's chains, dropped in afternoon trading after hitting a new yearly low of $22.75 earlier in the day. Shares have traded between $24.03 and $71.70 in the past 52 weeks. The stock was down $3.24, or 12 percent, to $23.78 by the afternoon.

Denny's Corp. shares also fell to a 52-week low of $2.27. By the afternoon, shares were down 16 cents, or 6.4 percent, to $2.33.

Shares of Morton's Restaurant Group Inc. slid 38 cents, or 5.8 percent, to $6.13 after hitting a low of $6 earlier.

Ruth's Hospitality Group Inc. shares fell 24 cents, or 5.7 percent, to $4 after reaching a new low of $3.98.

Shares of CBRL Group Inc., which operates Cracker Barrel Old Country stores and restaurants, dipped $1.07, or 5.3 percent, to $19.20 in the afternoon. Earlier, the stock hit a year-low of $19.06.