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1. Company Snapshot

1.a. Company Description

Denny's Corporation, through its subsidiary, Denny's, Inc., owns and operates full-service restaurant chains under the Denny's brand.As of December 29, 2021, it had 1,640 franchised, licensed, and company restaurants worldwide.The company was formerly known as Advantica Restaurant Group, Inc.


and changed its name to Denny's Corporation in 2002.Denny's Corporation was founded in 1953 and is based in Spartanburg, South Carolina.

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1.b. Last Insights on DENN

Denny's Corporation's recent performance was negatively impacted by weak Q4 earnings and revenue miss, driven by high egg prices, labor costs, and competition. The company's Q4 revenues fell 0.6% year-over-year, missing expectations by $1.3 million. Additionally, Denny's faces significant debt, with $271.9 million outstanding and high-interest expenses. The company's guidance for FY 2025 was also weak, expecting flat to negative same-store sales and a net reduction in restaurant locations.

1.c. Company Highlights

2. Denny's Corp's Q2 2025 Earnings: A Mixed Bag

Denny's Corporation reported total operating revenue of $117.7 million, a modest increase from $115.9 million in the prior year quarter. However, adjusted company restaurant operating margin was $6.7 million, down from $13.7 million in the prior year quarter due to increased product costs and legal and medical reserve adjustments. The company's EPS came in at $0.09, slightly below estimates of $0.1. The decline in margin was largely due to increased costs, but the company is confident that it can get back to a mid-teens margin in the back half of the year, driven by abatements in egg pressure, G&A savings, and better sales.

Publication Date: Aug -23

📋 Highlights
  • Sequential Sales Improvement:: Q2 same-restaurant sales declined 1.3%, a 170 bps improvement from Q1’s -3.0%.
  • Successful Promotion Impact:: The $1 buy-one-get-one "Slam" drove 70% of transactions from new/lapsed users.
  • Loyalty Program Launch:: A points-based program aims to boost traffic by 50-100 bps over time, launching late Q2.
  • Portfolio Rationalization:: Closing underperforming restaurants increased franchise AUVs by 5% year-to-date.
  • Keke’s Strong Performance:: Same-restaurant sales +4%, 6% average check increase due to pricing and off-premises growth.

Operational Highlights

The company's system-wide same-restaurant sales were negative 1.3%, a 170 basis point sequential improvement from Q1. Off-premises sales remained strong, representing 21% of total sales. Denny's also continued to focus on rationalizing its portfolio by closing underperforming restaurants, which has already resulted in a 5% increase in franchise AUVs. As CEO Kelli Valade noted, "We're encouraged by the response to our offers and promotions, which gives us confidence that things will continue to moderate."

Keke's Breakfast Cafe Performance

Keke's Breakfast Cafe, a growth brand, delivered strong same-restaurant sales of positive 4% compared to the prior year quarter. The brand continues to delight guests, with a 4.85 Google rating. Keke's has expanded beyond Florida, and its first-ever system-wide promotion drove substantial incremental traffic. The company opened 8 new cafes, including 4 company-owned, and refranchised 3 company cafes in Northern Florida.

Outlook and Guidance

The company is reiterating its guidance and expects to open 25 to 40 new Keke's cafes and close 70 to 90 underperforming restaurants. Commodity costs are expected to be between 3% and 5%, and labor inflation is expected to be between 2.5% and 3.5%. The company plans to resume share repurchases in the fourth quarter and achieve its previously stated guidance range of $15 million to $25 million.

Valuation

Denny's Corp's current P/S Ratio is 0.51, and EV/EBITDA is 10.85. The company's ROE is -40.39%, and ROIC is 6.75%. The stock's current valuation multiples suggest that the market is pricing in a moderate growth outlook. With the company's initiatives, such as promotions, making a difference for guests, and the expected launch of a new loyalty program, there is potential for improvement in sales and margins.

3. NewsRoom

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Jensen Huang Was Mistakenly Sent To A Kentucky Reform School, Where He Cleaned Bathrooms While His Brother Worked On Tobacco Farms

Dec -04

Source: feeds.benzinga.com

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Why Denny's Stock Gained 57.8% Last Month

Dec -03

Source: fool.com

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Denny's Canada sadly confirms the long-term closure of its Barrie location

Nov -26

Source: globenewswire.com

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BRODSKY & SMITH SHAREHOLDER UPDATE: Notifying Investors of the Following Investigations: Sealed Air Corporation (NYSE – SEE), Movano Inc. (Nasdaq - MOVE), Gulf Island Inc. (Nasdaq - GIFI), Denny’s Corporation (Nasdaq - DENN)

Nov -24

Source: globenewswire.com

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Keke's Breakfast Cafe Makes Mornings Merrier: Get a $10 Bonus With Every $50 Gift Card This Holiday Season

Nov -24

Source: globenewswire.com

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Denny’s Corporation $DENN Shares Sold by Envestnet Asset Management Inc.

Nov -16

Source: defenseworld.net

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Halper Sadeh LLC Encourages CDTX, MRSN, HOLX Shareholders to Contact the Firm to Discuss Their Rights

Nov -14

Source: prnewswire.com

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SHAREHOLDER NOTICE: Brodsky & Smith Announces an Investigation of Denny's Corporation (DENN)

Nov -05

Source: newsfilecorp.com

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (3.91%)

6. Segments

Denny's

Expected Growth: 4.0%

Denny's 4.0 growth driven by refranchising efforts, increasing same-store sales, and expansion into new markets. Additionally, menu innovation, digital transformation, and remodels of existing locations contribute to growth. Furthermore, the brand's focus on value, convenience, and customer experience also supports its growth momentum.

Other

Expected Growth: 2.0%

Denny's Corporation's 'Other' segment growth of 2.0% is driven by increased sales from company-owned restaurants, expansion of delivery and online ordering services, and strategic partnerships. Additionally, menu innovation, remodels, and marketing efforts have contributed to the growth. These initiatives have improved customer experience, driving sales and profitability.

7. Detailed Products

Grand Slam

A signature dish featuring two buttermilk pancakes, two eggs, two sausage links, and two strips of bacon

Moons Over My Hammy

A sandwich featuring scrambled eggs, crispy bacon, and melted cheese on sourdough bread

Fit Slam

A healthier take on the Grand Slam, featuring egg whites, turkey bacon, and whole wheat pancakes

Skillets

A variety of savory skillets featuring ingredients like scrambled eggs, sausage, bacon, and hash browns

Burgers

A range of classic American-style burgers featuring beef, chicken, or veggie patties

Sandwiches

A variety of sandwiches featuring ingredients like turkey, ham, roast beef, and chicken

Coffee and Beverages

A range of hot and cold beverages, including coffee, tea, and juice

Desserts

A variety of sweet treats, including pancakes, waffles, and milkshakes

8. Denny's Corporation's Porter Forces

Forces Ranking

Threat Of Substitutes

Denny's Corporation faces moderate threat from substitutes, as customers have various options for breakfast and casual dining. However, Denny's unique menu offerings and 24/7 operations help maintain customer loyalty.

Bargaining Power Of Customers

Denny's customers have limited bargaining power due to the company's widespread presence and lack of dependence on individual customers. Additionally, Denny's menu prices are relatively low, reducing customer negotiating power.

Bargaining Power Of Suppliers

Denny's has a diversified supplier base, reducing dependence on individual suppliers. The company's large scale of operations also gives it bargaining power in negotiating prices with suppliers.

Threat Of New Entrants

The casual dining industry has high barriers to entry, including significant capital requirements and established brand recognition. This limits the threat of new entrants and allows Denny's to maintain its market position.

Intensity Of Rivalry

The casual dining industry is highly competitive, with many established players competing for market share. Denny's faces intense rivalry from companies like IHOP, Applebee's, and Waffle House, which can lead to pricing pressures and advertising wars.

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

Value
Debt Weight 130.00%
Debt Cost 6.01%
Equity Weight -30.00%
Equity Cost 13.65%
WACC 3.72%
Leverage -433.37%

11. Quality Control: Denny's Corporation passed 4 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

Stock-Card
RAVE

A-Score: 5.3/10

Value: 5.0

Growth: 6.0

Quality: 8.8

Yield: 0.0

Momentum: 8.5

Volatility: 3.7

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Cannae Holdings

A-Score: 4.7/10

Value: 8.4

Growth: 1.6

Quality: 3.8

Yield: 3.0

Momentum: 4.0

Volatility: 7.7

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RCI Hospitality

A-Score: 4.3/10

Value: 7.6

Growth: 5.1

Quality: 5.2

Yield: 1.0

Momentum: 2.0

Volatility: 4.7

1-Year Total Return ->

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Stock-Card
First Watch

A-Score: 4.2/10

Value: 4.7

Growth: 8.2

Quality: 2.2

Yield: 0.0

Momentum: 6.0

Volatility: 4.3

1-Year Total Return ->

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Stock-Card
Chuy's

A-Score: 3.6/10

Value: 4.1

Growth: 6.8

Quality: 3.9

Yield: 0.0

Momentum: 5.0

Volatility: 2.0

1-Year Total Return ->

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Stock-Card
Denny's

A-Score: 3.5/10

Value: 8.5

Growth: 2.9

Quality: 4.3

Yield: 0.0

Momentum: 2.5

Volatility: 2.7

1-Year Total Return ->

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Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

6.17$

Current Price

6.17$

Potential

-0.00%

Expected Cash-Flows