Denny’s faced a challenging second quarter as revenue and non-GAAP profit missed Wall Street expectations, prompting a negative market reaction. Management attributed the underperformance to ongoing consumer volatility, particularly in key markets like Los Angeles and Houston, where macroeconomic pressures weighed heavily. CEO Kelli Valade noted that “household incomes remain under pressure and consumer sentiment continues to be volatile,” leading to cautious spending. Despite these headwinds, targeted value promotions and strong off-premise sales provided some offset, with new value deals drawing traffic from both new and returning guests.
Is now the time to buy DENN? Find out in our full research report (it’s free).
Denny's (DENN) Q2 CY2025 Highlights:
- Revenue: $117.7 million vs analyst estimates of $118.3 million (1.5% year-on-year growth, 0.5% miss)
- Adjusted EPS: $0.09 vs analyst expectations of $0.11 (16.3% miss)
- Adjusted EBITDA: $18.79 million vs analyst estimates of $20.16 million (16% margin, 6.8% miss)
- EBITDA guidance for the full year is $82.5 million at the midpoint, above analyst estimates of $81.29 million
- Operating Margin: 7.3%, in line with the same quarter last year
- Locations: 1,558 at quarter end, down from 1,603 in the same quarter last year
- Same-Store Sales fell 1.3% year on year (0.6% in the same quarter last year)
- Market Capitalization: $196.7 million
While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our Top 5 Analyst Questions From Denny's’s Q2 Earnings Call
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Michael Tamas (Oppenheimer) pressed for details about how Denny’s expects to hit its same-store sales guidance given volatility. CFO Robert Verostek described confidence in digital initiatives, remodels, and evolving value strategies to achieve targets.
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Todd Brooks (Benchmark Company) questioned the mix of everyday versus limited-time value offers. CEO Kelli Valade explained the importance of balancing consistent everyday value with episodic promotions to address changing guest preferences.
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Jake Bartlett (Truist Securities) asked about macroeconomic trends and the cadence of same-store sales. Valade acknowledged persistent choppiness but expressed encouragement from recent guest response to new promotions.
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Jon Tower (Citigroup) inquired about why successful promotions like BOGO were discontinued and their potential return. Valade said the company aims to refresh offers to maintain momentum and protect margins.
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Brooks (Benchmark Company) also sought clarity on refranchising activity and pricing impact. Verostek explained the strategic nature of refranchising and clarified that pricing gains were mainly due to carry-over from prior year increases.
Catalysts in Upcoming Quarters
Looking forward, the StockStory team will monitor (1) the impact of the new digital loyalty program on guest frequency and check size, (2) the pace and effectiveness of restaurant remodels and closures in improving profitability, and (3) Keke’s Breakfast Cafe’s ability to sustain growth and margin expansion as it enters new markets. Execution of targeted value promotions and continued traction in off-premise channels will also be important markers for Denny’s recovery.
Denny's currently trades at $3.79, up from $3.66 just before the earnings. At this price, is it a buy or sell? The answer lies in our full research report (it’s free).
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