Stock Story -
Diner restaurant chain Denny’s (NASDAQ:DENN) fell short of analysts' expectations in Q2 CY2024, with revenue flat year on year at $115.9 million. It made a non-GAAP profit of $0.13 per share, down from its profit of $0.15 per share in the same quarter last year.
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Denny's (DENN) Q2 CY2024 Highlights:
- Revenue: $115.9 million vs analyst estimates of $119 million (2.6% miss)
- EPS (non-GAAP): $0.13 vs analyst expectations of $0.19 (32.4% miss)
- Gross Margin (GAAP): 30.1%, down from 40.1% in the same quarter last year
- Locations: 1,603 at quarter end, down from 1,646 in the same quarter last year
- Same-Store Sales were flat year on year (3% in the same quarter last year)
- Market Capitalization: $389.1 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% annually as it didn't open many new restaurants.
This quarter, Denny's missed Wall Street's estimates and reported a rather uninspiring 0.8% year-on-year revenue decline, generating $115.9 million in revenue. Looking ahead, Wall Street expects sales to grow 4.9% over the next 12 months, an acceleration from this quarter.
Same-Store Sales Denny's demand within its existing restaurants has been relatively stable over the last eight quarters but fell behind the broader sector. On average, the company's same-store sales have grown by 2.5% 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 year on year same-store sales were flat. By the company's standards, this growth was a meaningful deceleration from the 3% 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 Q2 Results We were impressed by how significantly Denny's blew past analysts' gross margin expectations this quarter. On the other hand, its EPS and revenue missed Wall Street's estimates. Overall, this quarter could have been better. The stock remained flat at $7.65 immediately following the results.
![Denny's (NASDAQ:DENN) Reports Sales Below Analyst Estimates In Q2 Earnings](https://d68-invdn-com.investing.com/content/pic7f43d99980bed7536579f403e64eb0fd.jpeg)