Diner restaurant chain Denny’s (NASDAQ:DENN) reported results in line with analysts' expectations in Q4 FY2023, with revenue down 4.5% year on year to $115.4 million. It made a non-GAAP profit of $0.14 per share, down from its profit of $0.18 per share in the same quarter last year.
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Denny's (NASDAQ:DENN) Q4 FY2023 Highlights:
- Revenue: $115.4 million vs analyst estimates of $115.7 million (small miss)
- EPS (non-GAAP): $0.14 vs analyst expectations of $0.17 (19.4% miss)
- Adjusted EBITDA guidance for 2024 of $87 million vs analyst expectations of $91 million (4.6% miss)
- Free Cash Flow of $7.39 million, down 42.8% from the previous quarter
- Gross Margin (GAAP): 57.8%, up from 37.7% in the same quarter last year
- Same-Store Sales were up 1.3% year on year (beat vs. expectations of up 1.0% year on year)
- Store Locations: 1,631 at quarter end, increasing by 29 over the last 12 months
- Market Capitalization: $548.9 million
Open around the clock, Denny’s (NASDAQ:DENN) is a chain of diner restaurants serving breakfast and traditional American fare.
Sit-Down DiningSit-down restaurants offer a complete dining experience with table service. These establishments span various cuisines and are renowned for their warm hospitality and welcoming ambiance, making them perfect for family gatherings, special occasions, or simply unwinding. Their extensive menus range from appetizers to indulgent desserts and wines and cocktails. This space is extremely fragmented and competition includes everything from publicly-traded companies owning multiple chains to single-location mom-and-pop restaurants.
Sales GrowthDenny's is a small restaurant chain, which sometimes brings disadvantages compared to larger competitors benefitting from better brand awareness and economies of scale.
As you can see below, the company's revenue has declined over the last four years, dropping 3.8% annually as it closed restaurants.
This quarter, Denny's missed Wall Street's estimates and reported a rather uninspiring 4.5% year-on-year revenue decline, generating $115.4 million in revenue. Looking ahead, Wall Street expects sales to grow 1.6% over the next 12 months, an acceleration from this quarter.
Same-Store SalesDenny's demand within its existing restaurants has generally risen over the last two years but lagged behind the broader sector. On average, the company's same-store sales have grown by 5.5% year on year. Given its declining physical footprint over the same period, this performance stems from increased foot traffic at existing restaurants, which is sometimes a side effect of reducing the total number of locations.
In the latest quarter, Denny's same-store sales rose 1.3% year on year. This growth was a deceleration from the 2% year-on-year increase it posted 12 months ago, showing the business is still performing well but lost a bit of steam.
Key Takeaways from Denny's Q4 Results Same store sales and gross margin beat. On the other hand, revenue and EPS missed analysts' expectations. Guidance was tepid as well, with full year adjusted EBITDA guidance below expectations. Zooming out, we think this was mixed, quarter. The stock is down 2.1% after reporting, trading at $9.71 per share.
