Denny’s Inc. ((DENN)) has held its Q4 earnings call. Read on for the main highlights of the call.
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Denny’s Inc. Earnings Call Reveals Mixed Sentiment Amidst Growth and Challenges
The recent earnings call for Denny’s Inc. painted a picture of mixed performance, showcasing notable achievements alongside some challenges. The company reported impressive growth in same-restaurant sales and the expansion of virtual brands, yet faced obstacles such as a decline in early 2025 sales and operational inefficiencies in new markets. Nevertheless, there remains a strong sense of confidence in Denny’s strategic initiatives and its potential for long-term growth.
Denny’s Same-Restaurant Sales Growth
Denny’s reported a positive quarter-over-quarter same-restaurant sales growth of 1.1%, marking the fourth consecutive quarter of outperforming the BBI Family Dining sales index. This consistent performance underscores the brand’s resilience and ability to attract diners despite a challenging economic environment.
Keke’s Breakfast Cafe Performance
Keke’s Breakfast Cafe, a subsidiary of Denny’s, generated a 3% increase in same-restaurant sales, outperforming the BBI Family Dining sales index in Florida for the second consecutive quarter. This highlights the brand’s strong regional appeal and successful market penetration.
Virtual Brand Expansion
Denny’s has successfully expanded its virtual brand offerings, including the introduction of Banda Burrito, which contributed to a 70 basis point increase in same-restaurant sales. This strategy reflects the company’s adaptability and focus on digital transformation.
Diner 2.0 Remodel Program
The Diner 2.0 remodel program saw the completion of 23 restaurant remodels in 2024, resulting in a 6.5% lift in traffic at these locations. This initiative demonstrates Denny’s commitment to enhancing customer experience and modernizing its brand image.
Record-Breaking Year for Keke’s Growth
Keke’s experienced a record-breaking year in 2024 with the opening of 12 new cafes, expanding from Florida to six states. This rapid growth underscores the brand’s successful expansion strategy and increasing popularity.
Strong Adjusted EBITDA Growth
Denny’s reported an 11.1% year-over-year increase in adjusted EBITDA, reaching $22.2 million in Q4 2024. This robust financial performance reflects effective cost management and operational efficiency.
Decline in Early 2025 Sales
The earnings call revealed a decline in system-wide same-restaurant sales for Denny’s in early 2025, with a notable 5% drop in February. This highlights potential challenges in maintaining sales momentum amid changing market conditions.
Impact of Store Closures
Denny’s closed 88 restaurants in 2024 to improve franchisee cash flow, which has impacted overall sales performance. This strategic decision aims to streamline operations and focus on more profitable locations.
Challenges in New Keke’s Markets
Keke’s faced operational inefficiencies in new markets, affecting the overall adjusted company margin by approximately 70 basis points. This indicates potential hurdles in scaling the brand efficiently across new regions.
Franchise Agreement Terminations
The termination of two franchise agreements affected 11 Keke’s cafes, with two permanent closures due to low-volume sales. This decision reflects necessary adjustments to optimize business performance.
Guidance for 2025
During the earnings call, Denny’s provided forward-looking guidance for 2025, expecting domestic system-wide same-restaurant sales to range between -2% and +1%. The company plans to open 25 to 40 new restaurants while closing 70 to 90 low-performing locations. Denny’s aims for a consolidated adjusted EBITDA between $80 million and $85 million, including a fifty-third week. Despite shifts in consumer sentiment, the company remains confident in its strategies, focusing on value offerings, digital enhancements, and a new loyalty CRM program, alongside an emphasis on off-premise strategies and virtual brands.
In conclusion, Denny’s Inc.’s recent earnings call highlights a landscape of mixed performance, with both promising growth and significant challenges. The company’s strategic focus on innovation, digital transformation, and market expansion positions it for continued resilience and success in an evolving dining industry.
