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DENN (Post-Call): Plans to Relaunch its $2-$4-$6-$8 Value Menu with New $10 Options
After today’s (Tuesday’s) market close, Denny’s reported adjusted Q2 EPS of $0.13, falling short of our $0.16 forecast and sell-side consensus (according to Consensus Metrix) of $0.17. Second-quarter adjusted EBITDA amounted to $20.3 million. This was below our $23.6 million projection and consensus of $23.4 million.
DENN: Adjusting Our Estimates (7/2/2024)
This morning, we published an industry report entitled “Updating our Q2 Kalinowski Family Dining Same-Store Sales Index.” We encourage you to read that report in conjunction with this Denny’s note.
DENN (Post-Call): First Quarter Results Suggest 2024 Won’t be Over Easy
After today’s (Tuesday’s) market close, Denny’s reported adjusted Q1 EPS of $0.11. This fell short of our $0.14 forecast and sell-side consensus (according to Consensus Metrix) of $0.14. Denny’s comments that Q1 adjusted EPS was hampered “primarily due to higher worker’s compensation and general liability in the current quarter which weighed on adjusted net income per share by approximately $0.02.”
DENN: Adjusting Our Estimates (3/28/2024)
This morning, we published an industry report entitled “Updating our Q1 Kalinowski Family Dining Same-Store Sales Index.” We encourage you to read that report in conjunction with this Denny’s note.
DENN (Post-Call): Anticipates 2024 Adjusted EBITDA of $85-$89 Million
After today’s (Tuesday’s) market close, Denny’s reported Q4 2023 adjusted EPS of $0.14, falling short of our $0.17 estimate and sell-side consensus (according to Consensus Metrix) of $0.17. Legal costs as well as a higher-than-expected tax rate weighed on Q4 EPS. Fourth-quarter adjusted EBITDA reached $18.6 million, as compared to our $23.6 million projection and consensus of $23.2 million.
DENN: Adjusting Our Estimates (1/29/2024)
We believe that January has proven a tough month as regards same-store sales for a wide swath of the restaurant industry, including the family dining segment. Based on our conversations with industry contacts, bad weather – lapping a mild winter from one year ago – clearly seems to be the #1 reason behind the challenged January sales trends. As of today, it’s possible that February could prove to be similarly challenged.
DENN (Post-Call): Faces Some Macro Headwinds, But Keke’s New-Unit Agreements are Appetizing
After today’s (Monday’s) market close, Denny’s reported adjusted Q3 EPS of $0.17. This was above our $0.14 forecast and sell-side consensus (according to Consensus Metrix) of $0.15. The Q3 adjusted tax rate was 16.5%. This was more favorable than our 25.0% forecast and consensus at 25.1%. Compared to consensus, the 16.5% adjusted tax rate helped Q3 adjusted EPS by about +2 cents. Third-quarter adjusted EBITDA amounted to $22.2 million, basically in line with our $22.3 million projection, and matching consensus of $22.2 million.
DENN (Post-Call): July Same-Store Sales Outpace those of June
After today’s (Tuesday’s) market close, Denny’s reported second-quarter adjusted EPS of $0.14. This was lower than our $0.16 forecast, and also lower than sell-side consensus (according to Consensus Metrix) of $0.17.
DENN (Post-Call): Looks for 2023 Same-Store Sales at the Higher End of Target Range
After today’s (Tuesday’s) market close, Denny’s reported first-quarter adjusted EPS of $0.13. This matched our $0.13 projection, but was one cent short of sell-side consensus (according to Consensus Metrix) of $0.14.
DENN (Post-Call): Unveils Key 2023 Financial Targets
After Monday’s market close, Denny’s reported adjusted Q4 EPS of $0.18, coming in ahead of our $0.16 forecast and sell-side consensus (according to Consensus Metrix) of $0.17. The fourth quarter adjusted EBITDA figure of $23.4 million exceeded the higher end of the company’s stated target range of $21-$23 million, as well as our $22.9 million projection and consensus of $22.8 million.
DENN (Post-Call): Targets +1% to +3% Q4 Same-Store Sales Growth
After today’s (Tuesday’s) market close, Denny’s reported adjusted Q3 EPS of $0.12. This fell short of our $0.14 forecast and sell-side consensus (according to Consensus Metrix) of $0.14. However, the difference between the adjusted Q3 EPS actual and our forecast (and consensus) appears to be a legal settlement expense of $1.8 million. Excluding this settlement expense, adjusted EPS would have matched our forecast and consensus.
DENN: Adjusting Our Forecasts
Denny’s likely plans to report its third quarter earnings either after the market close on Monday, October 31st, or, after the market close on one day in early November.
DENN (Post-Call): Not Every Quarter Can be a Grand Slam
After today’s (Tuesday’s) market close, Denny’s reported Q2 adjusted EPS of $0.11, falling short of our $0.14 forecast and sell-side consensus (according to Consensus Metrix) of $0.14. Second-quarter adjusted EBITDA amounted to $17.2 million, below consensus at $19.5 million, but within the company’s target range as stated in early May of $17-$19 million.
DENN: Updating Our Q2E Same-Store Sales Projection
Denny’s likely plans to report its second quarter earnings during the first week of August, perhaps after the market close on either Monday, August 1st or Tuesday, August 2nd.
DENN (Post-Call): New CEO, New Acquisition, and Updated EPS Estimates
After today’s market close, Denny’s reported Q1 adjusted EPS of $0.11, falling short of our $0.12 forecast and sell-side consensus (according to Consensus Metrix) of $0.13. However, first-quarter adjusted EBITDA amounted to $17.7 million, and as such was within the company’s target range of $17-$19 million. Nevertheless, for Q2, Denny’s targets $17-$19 million in adjusted EBITDA, well below our forecast of $24.6 million (which we now move to $18 million) and consensus entering today of $25.4 million. The Q2 target range from the company includes about “$4 million related to share-based compensation expense.”
DENN (Post-Call): Omicron Effects to Weigh on Q1 Adjusted EBITDA
After today’s (Tuesday’s) market close, Denny’s reported adjusted EPS of $0.16, coming in one cent shy of our $0.17 forecast, and a penny light of sell-side consensus (according to Consensus Metrix) of $0.17. Adjusted EBITDA for Q4 amounted to $24.1 million, in the neighborhood of consensus at $24.5 million.
DENN: Adjusting Our Q1E Same-Store Sales Estimate Ahead of 2/15 EPS Release
Denny’s (DENN; Neutral, $15.31) plans to report its fourth quarter earnings after the market close on Tuesday, February 15th. The company has already pre-announced Q4 2021 U.S. same-store sales of +49.0% on a one-year basis and +0.7% on a two-year basis. In addition, on January 10th the company reiterated its full-year 2021 adjusted EBITDA target range of $84-$86 million.
DENN: Updating Our Same-Store Sales and EPS Estimates
We believe that family-dining segment same-store sales in the U.S. likely came in worse than the Street expected for Q4 2021. This seems to have been caused in part by consumer concerns about rising U.S. Covid cases (particularly in December), as well as concerns about the Omicron variant (also primarily in December).
DENN (Post-Call): October Two-Year Same-Store Sales Sequentially Improved
After today’s (Tuesday’s) market close, Denny’s reported adjusted Q3 EPS of $0.16. This was one cent short of our $0.17 forecast, although it matched sell-side consensus (according to Consensus Metrix) of $0.16. Third-quarter adjusted EBITDA reached $24.4 million, above consensus of $23.6 million.
DENN (Post-Call): Two-Year Same-Store Sales Positive in June and in July
After today’s (Tuesday’s) market close, Denny’s reported adjusted Q2 EPS of $0.18, coming in ahead of our $0.11 forecast and sell-side consensus (according to Consensus Metrix), which had ticked up to $0.12 in recent days. Second-quarter adjusted EBITDA amounted to $25.3 million, above consensus of $20.6 million.
DENN: Updating Our Same-Store Sales and EPS Estimates
Although family dining segment same-store sales seem to be lagging those of most other U.S. restaurant sectors on a two-year basis, they have still come in somewhat better than we have been anticipating. As such, we raise our full-Q2E same-store sales forecast for Denny’s to +121.0% (from +105.0%). This implies a two-year projection of about -5%. As of this writing, sell-side consensus — according to Consensus Metrix — for the Q2E one-year number is at +115.2%.
DENN: Denny’s Virtual NDR Updates Investors on Virtual Brands, 24/7 Operation
Yesterday, Kalinowski Equity Research hosted Denny’s for a virtual non-deal roadshow (NDR). We thank our buyside participants, as well as the participants from Denny’s: (1) President Mark Wolfinger, (2) EVP and CFO Robert Verostek, (3) VP – Investor Relations and FP&A Curt Nichols, and (4) Director – Investor Relations and FP&A Kayla Money. This report details some of the highlights from the virtual NDR. We maintain our Neutral rating on Denny’s (DENN; Neutral, $17.75) and note the following:
DENN: Tomorrow! Virtual NDR Featuring Denny’s on Wednesday, June 9th
*** On Wednesday, June 9th, Kalinowski Equity Research will host a virtual non-deal roadshow (NDR) featuring Denny’s. Anticipated participants from Denny’s include: (1) President Mark Wolfinger, (2) EVP and CFO Robert Verostek, (3) VP – Investor Relations and FP&A Curt Nichols, and (4) Director – Investor Relations and FP&A Kayla Money. Institutional investors interested in participating in this virtual NDR are encouraged to contact Caroline at [email protected],or your sales contact. ***
DENN (Post-Call): Q1 U.S. Same-Store Sales > Our “High on Sell-Side” Forecast
On Wednesday, June 9th, Kalinowski Equity Research will host a virtual non-deal roadshow (NDR) featuring Denny’s. Anticipated participants from Denny’s include: (1) President Mark Wolfinger, (2) EVP and CFO Robert Verostek, (3) VP – Investor Relations and FP&A Curt Nichols, and (4) Director – Investor Relations and FP&A Kayla Money. Institutional investors interested in participating in this virtual NDR are encouraged to contact Caroline at [email protected] or your sales contact.
DENN: How Does Denny’s Trade Heading Into, and After, Earnings?
Denny’s likely will release its Q1 2021 earnings in late April or early-to-mid May (with after the market close on Tuesday, May 4th a distinct possibility). How do DENN shares tend to trade heading into earnings, and the day after an earnings release?
DENN (Post-Call): U.S. Same-Store Sales -25% for First Two Weeks of February
After today’s (Tuesday’s) market close, Denny’s reported adjusted Q4 EPS of -$0.05, lower than our +$0.01 projection and sell-side consensus (according to Consensus Metrix) of -$0.04. Relative to our model, we attribute the Q4 EPS shortfall primarily to Payroll and Benefits/Company Restaurant Sales (44.4% actual vs. 41.5% projected).
DENN: Updating Our Stock Rating and EPS Projections
With this note, we change our rating on Denny’s (DENN; $17.41) to Neutral (from Buy). This change reflects: (1) lowered EPS estimates for 2021E and 2022E, and (2) a reduced same-store sales forecast for Q1E 2021, despite what appears to be some meaningful help from a calendar-shift effect related to Denny’s 2020 being a 53-week fiscal year, and (3) being mindful of DENN shares’ run-up from their 52-week low of $4.50 (intraday March 19, 2020) to $17.41 as of this past Friday’s market close. (FYI, the stock is also up +18.6% year-to-date.)
DENN Adjusting Our Q4E Forecasts
Given greater-than-expected deceleration in same-store sales trends for the U.S. family dining sector during December, we reduce our Q4E Denny’s U.S. same-store sales projection by -400 basis points, to -32.0%. According to Consensus Metrix data, this places us as the low estimate on the sell-side in this regard. As of this writing, sell-side consensus is at -23.9%.
Family Dining Market Share Opportunities for IHOP, Denny’s, and CBRL (Updated)
About six months ago, we published a report examining market-share opportunities within the family dining sector. In this report, we update our numbers. One of the important changes is that we now look for 10%-25% of the family dining restaurants in the U.S. that were in operation as of the start of 2020 to be closed permanently by the end of March 2021. (Previously, we were looking for 5%-10% of family dining restaurants to be closed permanently by the end of December 2020.) Keep in mind that we expect these closures to be heavily weighted toward independents/momand-pops and, to a somewhat lesser degree, smaller (privately-held in nearly all cases) restaurant chains.
Updating our Q4E Kalinowski Family Dining Same-Store Sales Index
With this report, we update our data-driven Kalinowski Family Dining Index for Q4E to -23.2%. This figure is based on our latest proprietary checks/data as regards samestore sales performance for this segment during October and November. Our implied numbers for this October, November, and December are approximately -20%, -23%, and -27%, respectively.
DENN Adjusting Our Q4E Forecasts
Given deceleration in same-store sales trends for the U.S. family dining sector, we reduce our Q4E Denny’s U.S. same-store sales projection by -600 basis points, to -28.0%. According to Consensus Metrix data, this places us as the low estimate on the sell-side in this regard. As of this writing, sell-side consensus is at -22.2%.
Large Restaurant Concepts Closing a Lot Less Units than Independent
Looking at unit closures announced and planned by large restaurant chains, and comparing these to unit closures from mom-and-pops/independents, goes to show just how large a market-share shift is going on in the U.S. restaurant industry. We look for most, if not all, of this market-share shift in favor of large concepts to persist in the years after 2020.
DENN Conference Call Highlights Opportunities in a Rapidly-Changing World
Yesterday, Kalinowski Equity Research hosted its latest “Ask the Experts” conference call — this time around, featuring Denny’s. The call included multiple participants from Denny’s: (1) President Mark Wolfinger, (2) Senior Vice President and Chief Financial Officer Robert Verostek, (3) Vice President Investor Relations and Financial Planning & Analysis Curt Nichols, and (4) Director Investor Relations and Financial Planning & Analysis Kayla Money. We thank them for their time!
DENN Conference Call TODAY Featuring Denny’s
Kalinowski Equity Research invites you to participate in our latest “Ask the Experts” conference call, to take place today — Tuesday, November 10th — starting at 11:00 AM Eastern time. The featured speakers from Denny’s will include: (1) President Mark Wolfinger, (2) Senior Vice President and Chief Financial Officer Robert Verostek, (3) Vice President Investor Relations and Financial Planning & Analysis Curt Nichols, and (4) Director Investor Relations and Financial Planning & Analysis Kayla Money.
DENN (Post-Call) Q3 EPS and Same-Store Sales Surpass Sell-Side Consensus
After Tuesday’s market close, Denny’s reported adjusted Q3 EPS of +$0.01, which was ahead of our -$0.03 forecast and sell-side consensus (according to Consensus Metrix) of -$0.03. We attribute the Q3 EPS beat largely to higher-than-anticipated company-owned restaurant margins (1.7% actual — or roughly -3% to -4% excluding an approximate “$1.5 million of favorable reserve adjustments and tax credits related to the CARES Act”) vs. our forecast (-6.5% projected). This more than offset higherthan-anticipated G&A/Revenues (19.1% actual vs. our 17.5% estimate) and D&A/ Revenues (5.7% actual vs. 5.3% estimate).
DENN “Ask the Experts” Call Series Denny’s
Kalinowski Equity Research invites you to participate in our latest “Ask the Experts” conference call, to take place on Tuesday, November 10th starting at 11:00 AM Eastern time. The featured speakers from Denny’s will include: (1) President Mark Wolfinger, (2) Senior Vice President and Chief Financial Officer Robert Verostek, (3) Vice President Investor Relations and Financial Planning & Analysis Curt Nichols, and (4) Director Investor Relations and Financial Planning & Analysis Kayla Money.
Updating our Q3E Kalinowski Family Dining Same-Store Sales Index
With this report, we update our data-driven Kalinowski Family Dining Index for Q3E to -29.0%. This figure is based on our latest proprietary checks/data as regards samestore sales performance for this segment during July 2020 and August 2020, as well as our best guess for what September 2020 is bringing us. The approximate monthly figures we use are -35% for July 2020, -29% for August 2020, and -25% for September 2020.
DENN Introducing Some EPS Estimates
With this report, we introduce our quarterly EPS estimates for Denny’s (DENN; Buy, $10.87) for 2021E as follows:
Q1E: $0.12
Q2E: $0.08
Q3E: $0.13
Q4E: $0.17
DENN (Post-Call) Adjusting our Q3E U.S. Same-Store Sales Projection
After today’s (Tuesday, July 28th’s) market close, Denny’s (DENN; Buy, $8.96) reported Q2 adjusted EPS of -$0.25, in between our -$0.28 projection and sellside consensus (according to Consensus Metrix) of -$0.20. On the other hand, Q2 adjusted EBITDA of -$5.1 million was better than our -$11.6 million estimate and consensus of -$6.9 million.
Family Dining Market Share Opportunities for IHOP, Denny’s, and Cracker Barrel
Is it possible the Street is underestimating sales and market-share opportunities in 2021 for some — if not all — of the three large publicly-traded family dining concepts?
Comparing Casual Dining & Family Dining Concepts Same-Store Sales Trends
A number of full-service restaurant companies have been generous as of late in terms of providing weekly same-store sales data. In this report, we compile and compare the recent same-store sales trends of various casual dining and family dining concepts. We also look at some segment trends, and see what this may imply for recent same-store trends of these concepts that have not yet provided samestore sales results for the last few weeks.
DENN (Post-Call) Sunny Side Up
After yesterday’s (Thursday, May 14th’s) market close, Denny’s (DENN; Buy, $8.77) reported Q1 adjusted EPS of $0.17, coming in ahead of our $0.11 forecast and sellside consensus (according to Consensus Metrix) of $0.07. In fact, the $0.17 adjusted EPS actual for Q1 is better than the $0.15 forecast we had prior to updating our model to (try to) take into account the effects related to COVID-19.
DENN Updating Our Same-Store Sales and EPS Estimates for 2020E & 2021E
We lower our U.S. systemwide same-store sales estimates for Denny’s (DENN; Buy) as follows:
Q1E 2020: down by -10.0 percentage points to -8.0%
Q2E 2020: down by -61.0 percentage points to -60.0%
Q3E 2020: down by -31.5 percentage points to -30.0%
Q4E 2020: down by -11.5 percentage points to -10.0%
Full-year 2020E: down by -28.5 percentage points to -27.5%
Full-year 2021E: up by +11.0 percentage points to +12.5%
DENN (Post-Call) Beyond Refranchising
After today’s (Tuesday’s) market close, Denny’s (DENN; Buy) reported adjusted Q4 2019 EPS of $0.23, ahead of our $0.16 forecast and sell-side consensus (according to Consensus Metrix) of $0.17. Factors in the Q4 EPS outperformance include: (1) better-than-expected Product Costs/Company Restaurant Sales (24.3% actual vs. our 24.8% forecast), (2) better-than-expected Payroll & Benefits/Company Restaurant Sales (37.6% actual vs. our 38.1% estimate, (3) better-than-expected Other Operating Costs/Company Restaurant Sales (14.2% actual vs. our 15.5% projection, (4) better-than-expected G&A Expenses/Revenues (13.5% actual vs. our 14.2% estimate), (5) better-than-expected D&A/Revenues (3.7% actual vs. our 4.3% forecast), (6) better-than-expected net interest expense ($3.57 million actual vs. our $4.50 million projection), and (7) a favorable tax rate (20.0% actual vs. our 21.3% estimate).
DENN Takeaways from New York City NDR Leave Us More Bullish
We recently hosted a Denny’s (DENN; Buy) non-deal roadshow (NDR) in New York City. We thank Denny’s CEO John Miller and Senior Director Investor Relations Curt Nichols for their participation! Following the NDR, we feel more confident in our bullish thesis on DENN. We maintain our Buy rating on DENN, and note the following:
DENN Does Anybody Want to See Denny’s Acquire Another Concept
Since reporting its third-quarter results and hosting its related conference call late last month, Denny’s (DENN; Buy) stock has mostly drifted downward. We believe that one factor contributing to this slide has been concern on the Street that Denny’s might acquire part or all of another restaurant concept. In our view, it would be a mistake for Denny’s to do so. We believe the odds do not favor Denny’s pursuing this route, although we (of course) cannot rule out this possibility with 100% certainty. We reiterate our Buy rating on DENN, and note the following:
DENN (Post-Call) Moves Closer to Beyond Refranchising
After Tuesday’s market close, Denny’s (DENN; Buy) reported adjusted Q3 EPS of $0.18, coming in ahead of our $0.16 forecast and sell-side consensus (according to Consensus Metrix) of $0.16. We attribute the EPS beat to a combination of: (1) better-than-expected Payroll and Benefits/Company Restaurant Sales (37.4% actual vs. 38.3% projected), (2) better-than-anticipated G&A/Revenues (13.2% actual vs. 13.8% estimated), (3) better-than-expected D&A/Revenues (3.5% actual vs. 4.2% forecasted), (4) lower-than-anticipated interest expense ($4.2 million actual vs. $5.3 million projected), and (5) a favorable adjusted tax rate (15.5% actual vs. 21.2% forecasted) — all partially offset by some other factors (such as lower-thananticipated Company Restaurant Sales, due to the faster-than-expected pace of refranchising).
DENN New York City NDR Planned for Wednesday November 20th
Kalinowski Equity Research will host a non-deal roadshow (NDR) with Denny’s (DENN; Buy) in New York City on Wednesday, November 20th. Management attendees will include: (1) CEO & President John Miller, (2) Executive Vice President, Chief Administrative Officer & CFO Mark Wolfinger, (3) Senior Vice President, Finance Robert P. Verostek, and (4) Senior Director Investor Relations Curt Nichols. This should be an excellent opportunity for institutional buysiders to hear from Denny’s leadership about its refranchising initiative as well as about issues affecting the restaurant industry in general. Institutional buysiders who are interested in participating should indicate their interest to: [email protected]
DENN (Post-Call) Accelerated Refranchising and Grand Slam Same-Store Sales
After today’s market close, Denny’s (DENN; Buy) reported adjusted Q2 EPS of $0.23, ahead of our $0.18 estimate and sell-side consensus (according to Consensus Metrix) of $0.18. We attribute the EPS beat to some “tax provision benefits” — the Q2 actual (adjusted) tax rate was -1.2%; a more normalized tax rate of approximately 20.0% would have led to an adjusted EPS number of about $0.18, by our calculations.
DENN 2019 Franchise Disclosure Document Review for Denny’s
Not too long ago, Denny’s (DENN; Buy) filed its 400+ page Franchise Disclosure Document (FDD) for 2019. In this report, we cite some of the highlights from that document following our review of it, including our review of it in comparison to last year’s Franchise Disclosure Document. For example, the 2019 FDD reveals that Denny’s is testing Presto, providing these details: “Presto is a table top ordering option that we are testing in 2019. The cost for 30 tablets is $15,000 that includes the tablets and three years of software services. Presto does not offer financing but has financing partners. These partners may offer leases to franchisees for three or four years with an option to purchase the tablets at the end of term. In addition to the ability for customers to pay their check using the tablet, games are offered. The current price is $1.99 for unlimited game play during a single visit. Restaurants maintain 80% of profits from game play with 20% being paid to Presto. The Presto charges will be billed monthly through your franchise finance account.”