Diner restaurant chain Denny’s (NASDAQ:DENN) fell short of analysts' expectations in Q1 CY2024, with revenue down 6.4% year on year to $110 million. It made a non-GAAP profit of $0.11 per share, down from its profit of $0.13 per share in the same quarter last year.
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Denny's (NASDAQ:DENN) Q1 CY2024 Highlights:
- Revenue: $110 million vs analyst estimates of $115.2 million (4.5% miss)
- EPS (non-GAAP): $0.11 vs analyst expectations of $0.14 (22.5% miss)
- Full year guidance maintained for same store sales, increased slightly for adjusted EBITDA
- Gross Margin (GAAP): 31.4%, down from 39% in the same quarter last year
- Same-Store Sales were up 1.3% year on year
- Store Locations: 1,614 at quarter end, decreasing by 34 over the last 12 months
- Market Capitalization: $428.1 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 five years, dropping 6.1% annually as it didn't open many new restaurants.
This quarter, Denny's missed Wall Street's estimates and reported a rather uninspiring 6.4% year-on-year revenue decline, generating $110 million in revenue. Looking ahead, Wall Street expects sales to grow 4.2% over the next 12 months, an acceleration from this quarter.
Same-Store SalesSame-store sales growth is an important metric that tracks organic growth and demand for a restaurant's established locations.
Denny'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 2.7% year on year. Given its flat restaurant base over the same period, this performance stems from increased foot traffic or larger order sizes per customer at existing locations.
In the latest quarter, Denny's same-store sales rose 1.3% year on year. By the company's standards, this growth was a meaningful deceleration from the 8.4% year-on-year increase it posted 12 months ago. We'll be watching Denny's closely to see if it can reaccelerate growth.
Key Takeaways from Denny's Q1 Results The company's revenue and EPS unfortunately both missed analysts' expectations. On a brighter note, full year same store sales was maintained and full year adjusted EBITDA was raised slightly. Overall, this was a mixed quarter for Denny's. The company is down 4.9% on the results and currently trades at $7.62 per share.
