Search Icon
Denny's Corporation (NASDAQ:DENN) Reports Solid Q2 2024 Results, Navigates Competitive Environment
Published on September 24, 2024 | Ticker: DENN

Denny's Corporation, the operator of the iconic Denny's and Keke's Breakfast Café brands, has reported its financial results for the second quarter of fiscal 2024. Despite facing a challenging macroeconomic environment, the company has demonstrated its ability to navigate the competitive landscape and deliver solid performance.

Financials

For the full fiscal year 2023, Denny's reported annual revenue of $463.92 million and net income of $19.95 million. The company generated annual operating cash flow of $72.1 million and free cash flow of $62.12 million, showcasing its strong liquidity position and ability to reinvest in the business.

In the second quarter of 2024, Denny's reported total operating revenue of $115.9 million, compared to $116.9 million in the prior-year quarter. This slight decrease of 0.9% was primarily driven by a decline in same-restaurant sales, partially offset by the addition of three Keke's equivalent units. Franchise and license revenue was $61.6 million, down from $62.0 million in the prior-year quarter, due to decreases in franchise occupancy revenue and franchise sales, partially offset by an increase in franchise advertising revenue.

Adjusted franchise operating margin was $30.8 million, or 50.0% of franchise and license revenue, compared to $31.6 million, or 50.9%, in the prior-year quarter. The margin change was primarily driven by the impact of lower sales on royalty and advertising revenues, as well as lease terminations. Adjusted company restaurant operating margin was $7.2 million, or 13.2% of company restaurant sales, compared to $8.5 million, or 15.4%, in the prior-year quarter. This margin change was primarily due to a decrease in same-restaurant sales and increases in marketing and general liability insurance costs.

Net income for the quarter was $3.6 million, or $0.07 per diluted share. Adjusted net income per share was $0.13, compared to $0.15 in the prior-year quarter. The company's effective tax rate for the quarter was 25.1%, compared to 23.8% in the prior-year quarter.

Same-Restaurant Sales Performance

Denny's domestic system-wide same-restaurant sales declined 0.6% in the second quarter, with a 0.4% decrease at domestic franchised restaurants and a 2.6% decrease at company restaurants. Keke's system-wide same-restaurant sales declined 4.6% during the quarter. However, the company noted that Keke's continues to make progress in narrowing the gap to the BBI Family Dining sales index in Florida.

Restaurant Development and Capital Allocation

During the quarter, Denny's opened four new restaurants, including one Keke's company location. The company also continued its commitment to returning capital to shareholders, allocating $4.7 million to share repurchases while investing $5 million in cash capital expenditures, primarily related to Keke's development.

Outlook

Looking ahead, Denny's has updated its full-year 2024 guidance. The company now expects Denny's domestic system-wide same-restaurant sales to be between -1% and +1%, compared to its previous guidance of 0% to 3%. Consolidated restaurant openings are now expected to be 30 to 40, including 12 to 16 new Keke's restaurants, with a consolidated net decline of 20 to 30 restaurants. Commodity inflation is projected to be between 0% and 2%, while labor inflation is expected to be between 3% and 4%. Total general and administrative expenses are anticipated to be between $82 million and $85 million, including approximately $11 million related to share-based compensation expense. Adjusted EBITDA is now expected to be between $83 million and $87 million.

Conclusion

Denny's has demonstrated its ability to navigate the challenging macroeconomic environment, leveraging its strong brand recognition, value-driven initiatives, and strategic investments in the Keke's brand. The company's focus on driving traffic, optimizing operations, and expanding its footprint positions it well to capitalize on the recovery in the dining industry.

As Denny's continues to execute its strategic priorities, investors will be closely monitoring the company's ability to maintain its competitive edge, drive same-restaurant sales growth, and successfully integrate and derive the expected benefits from its Keke's acquisition. With a solid financial foundation and a commitment to innovation and operational excellence, Denny's appears well-positioned to navigate the current industry landscape and deliver long-term value for its shareholders.

You may be interested in...
The Chef's Warehouse (CHEF): A Culinary Empire Built on Passion and Strategic Growth
The Chef's Warehouse, Inc. (CHEF) is a remarkable success story in the specialty food distribution industry. Founded in 1985 by industry pioneers Christopher Pappas and John Pappas, the company has evolved from a small regional player to a dominant force serving the nation's leading independent restaurants, fine dining establishments, and other culinary institutions.
Read More
Rave Restaurant Group (NASDAQ:RAVE) - Buffet Resurgence Fueling the Brand's Comeback
Rave Restaurant Group, a diversified franchisor of pizza and fast-casual dining concepts, has emerged as a resilient player in the dynamic food service industry. With a focus on its flagship Pizza Inn brand and strategic investments in its Pie Five fast-casual concept, the company is navigating the evolving market landscape and positioning itself for sustained growth.
Read More
Denny's Corporation (NASDAQ:DENN): Serving Up Satisfying Growth Through Innovation and Operational Excellence
Denny's Corporation, the iconic American diner brand, has a rich history of providing satisfying meals and exceptional service to its loyal customers across the United States. As the company navigates the evolving restaurant landscape, it has demonstrated a relentless commitment to innovation, operational efficiency, and strategic growth initiatives that have positioned it for long-term success.
Read More
Texas Roadhouse: A Casual Dining Powerhouse Delivering Consistent Performance
Texas Roadhouse Inc. (NASDAQ:TXRH) is a leading player in the casual dining segment, operating predominantly through its flagship Texas Roadhouse brand as well as the Bubba's 33 and Jaggers concepts. The company's impressive track record of growth, operational efficiency, and ability to navigate industry challenges make it a compelling investment proposition in the restaurant space.
Read More
The Wendy's Company (WEN): Delivering on a Compelling Growth Vision
The Wendy's Company has a rich legacy as a pioneer in the quick-service restaurant industry, tracing its roots back to 1969 when Dave Thomas opened the first Wendy's restaurant in Columbus, Ohio. Over the past five decades, the brand has grown to become the second-largest quick-service hamburger chain in the U.S. and the third-largest globally, with a presence across 7,290 restaurants in the U.S. and 31 foreign countries and U.S. territories as of September 29, 2024.
Read More