Denny's first quarter results for 2025 were met with a positive market reaction, reflecting the company's ability to slightly exceed Wall Street’s revenue expectations despite headwinds in the family dining sector. Management attributed the quarter’s performance to aggressive value-driven promotions and targeted marketing initiatives, which helped offset softer same-restaurant sales and a decline in operating margins. CEO Kelli Valade emphasized that the limited-time “Buy One Slam, Get One for $1” offer was particularly effective, noting, “Nearly 70% of BOGO transactions have come from lapsed or new customers.”
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Denny's (DENN) Q1 CY2025 Highlights:
- Revenue: $111.6 million vs analyst estimates of $110.1 million (1.5% year-on-year growth, 1.4% beat)
- Adjusted EPS: $0.08 vs analyst estimates of $0.08 (in line)
- Adjusted EBITDA: $16.82 million vs analyst estimates of $17.82 million (15.1% margin, 5.7% miss)
- EBITDA guidance for the full year is $82.5 million at the midpoint, in line with analyst expectations
- Operating Margin: 4.7%, down from 9.1% in the same quarter last year
- Locations: 1,557 at quarter end, down from 1,614 in the same quarter last year
- Same-Store Sales fell 3% year on year (1.3% in the same quarter last year)
- Market Capitalization: $209.1 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 Denny's’s Q1 Earnings Call
- Michael Tamas (Oppenheimer & Co.): Asked if Denny’s will need to maintain aggressive discounting to sustain traffic. CEO Kelli Valade responded that while value promotions are effective now, the company will balance promotional and everyday value strategies based on guest needs and market dynamics.
- Jake Bartlett (Truist Securities): Questioned whether the consumer pullback is temporary and how it impacts guidance. CFO Robert Verostek noted that guidance assumes moderation in consumer sentiment but cautioned that volatility could disrupt trends at any time.
- Todd Brooks (Benchmark Company): Inquired about future menu pricing actions and the impact of promotions on sales mix. Verostek explained that additional menu pricing is possible but will be data-driven, and that the BOGO offer has a modest impact on sales mix and check averages.
- Jon Tower (Citi): Asked how Denny’s is managing store-level margin impact from value promotions. Valade detailed that upselling beverages, menu innovation, and operational efficiencies are being prioritized to offset margin dilution from aggressive discounting.
- Eric Gonzalez (KeyBanc Capital Markets): Sought clarity on margin pressures from new Keke’s openings and commodity costs. Verostek stated that inefficiencies from new cafes are expected to subside as locations mature and that egg cost impacts should lessen if market conditions stabilize.
Catalysts in Upcoming Quarters
In coming quarters, the StockStory team will monitor (1) the traction of Denny’s digital loyalty and CRM initiatives in re-engaging guests, (2) further off-premise and virtual brand growth as a driver of traffic and mix, and (3) the pace and profitability of new Keke’s openings, especially as operational inefficiencies normalize. Developments in commodity markets and consumer spending trends will also be critical signposts for margin recovery.
Denny's currently trades at $4.22, up from $3.79 just before the earnings. Is the company at an inflection point that warrants a buy or sell? The answer lies in our full research report (it’s free).
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