Denny’s Corporation Releases Preliminary Financial Results for Fourth Quarter and Fiscal Year 2023

Rhea-AI Summary

Denny's Corporation (DENN) reports solid fourth-quarter and fiscal year 2023 results, with domestic system-wide same-restaurant sales up by 1.3% and 3.5% respectively. The company opened 32 restaurants in 2023 and allocated $16.2 million to share repurchases in the fourth quarter.

Positive

• Solid domestic system-wide same-restaurant sales in the fourth quarter and fiscal year 2023.
• Sequential improvement in sales throughout the fourth quarter.
• Strategies and accelerated development of the Keke's brand show growing momentum for the company.
• Allocation of $16.2 million to share repurchases in the fourth quarter.

Negative

• None.

Insights

Market Research Analyst

The recent report by Denny's Corporation regarding its fourth quarter and fiscal year performance indicates a mixed scenario in terms of growth. A modest increase in same-restaurant sales of 1.3% in Q4 and 3.5% for the fiscal year suggests resilience in the face of a challenging operating environment. However, when dissecting these figures, it becomes apparent that company-owned restaurants underperformed franchised ones, which might raise concerns about operational efficiency at corporate locations.

Moreover, the strategic expansion of the Keke's brand and the opening of 32 new restaurants, including 11 international locations, implies a focus on growth and market penetration. Nevertheless, the closure of 57 restaurants could be indicative of optimization efforts or potential underperformance in certain markets. The net decrease in total units year-over-year should be examined closely for its impact on long-term revenue streams and brand presence.

The share repurchase program, with $52.1 million allocated in the full year and $100 million still available, reflects a commitment to shareholder value but also warrants scrutiny regarding capital allocation strategies. Investors might question whether these funds could be more effectively utilized for operational improvements or expansion initiatives.

Financial Analyst

Analyzing Denny's Corporation's preliminary financial data reveals subtle growth trends and a cautious optimism moving into 2024. The reported same-restaurant sales growth, particularly in franchised restaurants, suggests effective brand leverage and franchisee performance. However, the decline in same-restaurant sales for Keke's highlights potential challenges in integrating and growing the newly acquired brand.

The financial strategy indicated by the share repurchase activity is notable, as it suggests confidence in the company's intrinsic value by the management. A repurchase program of this scale can be accretive to earnings per share (EPS), potentially making the stock more attractive to investors. However, it is essential to balance this with the need for investment in growth and operational improvements to ensure long-term sustainability.

Finally, the expected release of full financial results and guidance for the upcoming year will be a critical moment for stakeholders. It will provide a comprehensive view of the company's financial health and strategic direction, which is essential for informed decision-making.

Economist

The performance of Denny's Corporation must be contextualized within the broader economic landscape and consumer behavior trends. The modest growth in same-restaurant sales could be reflecting broader economic pressures such as inflation, wage stagnation, or shifts in consumer dining habits. The restaurant industry is often seen as a bellwether for discretionary spending and Denny's performance might suggest a cautious consumer base.

From an economic standpoint, the company's international expansion amidst a challenging environment may indicate a strategic move to diversify revenue sources and tap into emerging markets. This could mitigate risks associated with domestic economic downturns. However, international operations come with their own set of challenges, including currency fluctuations and geopolitical risks, which need to be managed effectively.

In addition, the closure of restaurants could be seen as a response to market saturation or an adjustment to the company's footprint in response to changing economic conditions. This restructuring could potentially lead to cost savings and a sharper focus on profitable locations.

SPARTANBURG, S.C., Jan. 08, 2024 (GLOBE NEWSWIRE) -- Denny’s Corporation (the "Company") (NASDAQ: DENN), owner and operator of Denny's Inc. ("Denny's") and Keke's Inc. ("Keke's") today reported selected preliminary and unaudited results for its fourth quarter and fiscal year ended December 27, 2023.

Kelli Valade, Chief Executive Officer, stated, "We were pleased to deliver solid Denny’s domestic system-wide same-restaurant sales* in the fourth quarter, reflecting sequential improvement throughout the quarter, while also achieving results at the high-end of our previously guided range for the full year. Despite a persistently challenging operating environment, we enter 2024 with growing momentum towards our key strategies and the accelerated development of the Keke’s brand.”

Preliminary Results

Denny's fourth quarter domestic system-wide same-restaurant sales* were 1.3% compared to the equivalent fiscal period in 2022, including 1.5% at domestic franchised restaurants and (1.2)% at company restaurants.

Denny's fiscal year domestic system-wide same-restaurant sales* were 3.5% compared to the equivalent fiscal period in 2022, including 3.6% at domestic franchised restaurants and 2.7% at company restaurants.

In 2023, the Company opened 32 restaurants, including 11 international locations, and closed 57 restaurants, bringing the year-end total restaurant count to 1,631.

In the fourth quarter, the Company allocated $16.2 million to share repurchases, resulting in $52.1 million allocated to share repurchases for the full year. As of December 27, 2023, the Company had approximately $100 million remaining under its existing repurchase authorization.

The Company expects to release financial and operating results for its fourth quarter and fiscal year ended December 27, 2023, along with financial guidance for 2024, after the market closes on Tuesday, February 13, 2024.

DENNY’S CORPORATION
Preliminary Results
(Unaudited)
				Denny's								Keke's (2)
Changes in Same-Restaurant Sales (1) vs. Prior Year				Quarter Ended				Fiscal Year Ended				Quarter Ended				Fiscal Year Ended
(Increase (decrease))				12/27/23		12/28/22		12/27/23		12/28/22		12/27/23		12/28/22		12/27/23		12/28/22
	Company Restaurants			(1.2)%		6.0%		2.7%		10.4%		0.7%		N/A		(1.1)%		N/A
	Domestic Franchise Restaurants			1.5%		1.7%		3.6%		6.0%		(3.8)%		N/A		(4.4)%		N/A
	Domestic System-wide Restaurants			1.3%		2.0%		3.5%		6.3%		(3.1)%		N/A		(3.9)%		N/A
(1		)	Same-restaurant sales include sales at company restaurants and non-consolidated franchised and licensed restaurants that were open during the comparable periods noted. Total operating revenue is limited to company restaurant sales and royalties, advertising revenue, fees and occupancy revenue from non-consolidated franchised and licensed restaurants. Accordingly, domestic franchise same-restaurant sales and domestic system-wide same-restaurant sales should be considered as a supplement to, not a substitute for, the Company's results as reported under GAAP.
(2		)	Effective July 20, 2022, the Company acquired Keke's; as such the data represents post-acquisition results.

			Denny's									Keke's
						Franchised								Franchised
Restaurant Unit Activity			Company			& Licensed			Total			Company		& Licensed		Total
Ending Units September 27, 2023			66			1,522			1,588			8		48		56
	Units Opened		—			7			7			—		2		2
	Units Closed		(1	)		(21	)		(22	)		—		—		—
		Net Change	(1	)		(14	)		(15	)		—		2		2
Ending Units December 27, 2023			65			1,508			1,573			8		50		58
			Denny's									Keke's
						Franchised								Franchised
Restaurant Unit Activity			Company			& Licensed			Total			Company		& Licensed		Total
Ending Units December 28, 2022			66			1,536			1,602			8		46		54
	Units Opened		—			28			28			—		4		4
	Units Closed		(1	)		(56	)		(57	)		—		—		—
		Net Change	(1	)		(28	)		(29	)		—		4		4
Ending Units December 27, 2023			65			1,508			1,573			8		50		58

*Same-restaurant sales include sales at company restaurants and non-consolidated franchised and licensed restaurants that were open during the comparable periods noted. Total operating revenue is limited to company restaurant sales and royalties, advertising revenue, initial and other fees and occupancy revenue from non-consolidated franchised and licensed restaurants. Accordingly, domestic franchise same-restaurant sales and domestic system-wide same-restaurant sales should be considered as a supplement to, not a substitute for, the Company's results as reported under GAAP.

Upcoming Investor Conference Presentation

The Company will be participating in the 2024 Annual ICR Conference taking place at the JW Marriott Orlando Grande Lakes in Orlando, Florida. The Company’s presentation will take place on Tuesday, January 9, 2024, at 8:30 a.m. Eastern Time. Investors and interested parties may listen to a live audio webcast of the event which will be available online in the Investor Relations section of the Company’s website at investor.dennys.com with a replay of the webcast available following the live event. Investors and interested parties may access a copy of the presentation in the Events and Presentations section of the Company’s website at investor.dennys.com.

About Denny’s Corporation

Denny’s Corporation is one of America’s largest full-service restaurant chains based on number of restaurants. As of December 27, 2023, the Company consisted of 1,631 restaurants, 1,558 of which were franchised and licensed restaurants and 73 of which were company operated.

Denny's Corporation consists of the Denny’s brand and the Keke’s brand. As of December 27, 2023, the Denny's brand consisted of 1,573 global restaurants, 1,508 of which were franchised and licensed restaurants and 65 of which were company operated. As of December 27, 2023, the Keke's brand
consisted of 58 restaurants, 50 of which were franchised restaurants and 8 of which were company operated.

For further information on Denny's Corporation, including news releases, links to SEC filings, and other financial information, please visit investor.dennys.com.

Cautionary Language Regarding Forward-Looking Statements

The Company urges caution in considering its current trends and any outlook on earnings disclosed in this press release. In addition, certain matters discussed in this release may constitute forward-looking statements. These forward-looking statements, which reflect management's best judgment based on factors currently known, are intended to speak only as of the date such statements are made and involve risks, uncertainties, and other factors that may cause the actual performance of Denny’s Corporation, its subsidiaries, and underlying restaurants to be materially different from the performance indicated or implied by such statements. Words such as “expect”, “anticipate”, “believe”, “intend”, “plan”, “hope”, "will", and variations of such words and similar expressions are intended to identify such forward-looking statements. Except as may be required by law, the Company expressly disclaims any obligation to update these forward-looking statements to reflect events or circumstances after the date of this release or to reflect the occurrence of unanticipated events. Factors that could cause actual performance to differ materially from the performance indicated by these forward-looking statements include, among others: economic, public health and political conditions that impact consumer confidence and spending, commodity and labor inflation; the ability to effectively staff restaurants and support personnel; the Company's ability to maintain adequate levels of liquidity for its cash needs, including debt obligations, payment of dividends, planned share repurchases and capital expenditures as well as the ability of its customers, suppliers, franchisees and lenders to access sources of liquidity to provide for their own cash needs; competitive pressures from within the restaurant industry; the Company's ability to integrate and derive the expected benefits from its acquisition of Keke's Breakfast Cafe; the level of success of the Company’s operating initiatives and advertising and promotional efforts; adverse publicity; health concerns arising from food-related pandemics, outbreaks of flu viruses or other diseases; changes in business strategy or development plans; terms and availability of capital; regional weather conditions; overall changes in the general economy (including with regard to energy costs), particularly at the retail level; political environment and geopolitical events (including acts of war and terrorism); and other factors from time to time set forth in the Company’s SEC reports and other filings, including but not limited to the discussion in Management’s Discussion and Analysis and the risks identified in Item 1A. Risk Factors contained in the Company’s Annual Report on Form 10-K for the year ended December 28, 2022 (and in the Company’s subsequent Quarterly Reports on Form 10-Q and Current Reports on Form 8-K).

FAQ

What were Denny's domestic system-wide same-restaurant sales for the fourth quarter of 2023?

Denny's domestic system-wide same-restaurant sales were 1.3% for the fourth quarter of 2023.

How many restaurants did Denny's open in 2023?

Denny's opened 32 restaurants in 2023.

How much did Denny's allocate to share repurchases in the fourth quarter?

Denny's allocated $16.2 million to share repurchases in the fourth quarter.

When will Denny's release financial and operating results for its fourth quarter and fiscal year ended December 27, 2023?

Denny's will release financial and operating results for its fourth quarter and fiscal year ended December 27, 2023, along with financial guidance for 2024, after the market closes on Tuesday, February 13, 2024.

What event will Denny's be participating in on January 9, 2024?

Denny's will be participating in the 2024 Annual ICR Conference taking place at the JW Marriott Orlando Grande Lakes in Orlando, Florida.

Where can investors and interested parties listen to a live audio webcast of the event?

Investors and interested parties may listen to a live audio webcast of the event in the Investor Relations section of the Company’s website at investor.dennys.com.

Where can investors and interested parties access a copy of the presentation?

Investors and interested parties may access a copy of the presentation in the Events and Presentations section of the Company’s website at investor.dennys.com.