Zinger Key Points
- Denny's Q3 same-restaurant sales dipped by 0.1%, with lower operating income at $11.7 million compared to $14 million last year.
- Denny's projects same-restaurant sales to range from -1% to 0% and expects commodity inflation around 2% in the coming period.
Denny’s Corporation DENN shares are trading lower on Tuesday.
The company reported third-quarter adjusted earnings per share of 14 cents, missing the analyst consensus of 15 cents. Quarterly sales of $111.76 million missed the street view of $115.46 million.
Denny’s domestic system-wide same-restaurant sales fell 0.1%, including a 0.1% decline at domestic franchised restaurants and a 0.4% decrease at company restaurants.
The company opened two new franchised restaurants and completed six remodels, including three at company locations.
Operating income fell to $11.7 million from $14.0 million in the same quarter last year.
Adjusted company restaurant operating margin was $6.2 million, or 11.8% of company restaurant sales, compared to $7.6 million, or 14.3% for the prior-year quarter.
This margin change was primarily due to investments in marketing and higher occupancy costs, including general liability insurance costs, for the current quarter.
The company ended the quarter with $272.0 million of total debt outstanding, including $261.0 million of borrowings under its credit facility.
Outlook: Denny’s expects domestic same-restaurant sales to range from -1% to 0%, compared to a previous forecast of -1% to 1%.
The company plans to open 30 to 40 restaurants, including 12 to 16 new Keke’s locations, with a net decline of 45 to 55.
Commodity inflation is anticipated at approximately 2%, while labor inflation is expected to be between 3% and 4%.
Total general and administrative expenses are projected to be between $82 million and $85 million, which includes around $11 million for share-based compensation.
Adjusted EBITDA is forecasted to be between $81 million and $84 million, down from the earlier estimate of $83 million to $87 million.
Price Action: DENN shares are trading lower by 17.3% to $5.49 at last check Tuesday.
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