Diner restaurant chain Denny’s (NASDAQ:DENN) fell short of analysts' expectations in Q1 CY2024, with revenue down 6.4% year on year to $110 million. It made a non-GAAP profit of $0.11 per share, down from its profit of $0.13 per share in the same quarter last year.

Is now the time to buy Denny's? Find out by accessing our full research report, it's free.

Kelli Valade, Chief Executive Officer, stated, "I am very pleased that our first quarter domestic same-restaurant sales and traffic outperformed both the family and casual dining segments, while overcoming the industry's tough operating environment. We were also excited for Keke's to expand outside of Florida and begin testing our new design in the latest Florida openings. I am encouraged by the sales driving initiatives planned for the back half of the year including expanding our third virtual brand, Banda Burrito, launching our test with Franklin Junction, reigniting our Denny's remodel program and having the full force of our local co-op advertising fund for the first time since the pandemic began. These initiatives are sure to generate incremental sales and margins at our flagship brand.”

Open around the clock, Denny’s (NASDAQ:DENN) is a chain of diner restaurants serving breakfast and traditional American fare.

Sit-Down Dining

Sit-down restaurants offer a complete dining experience with table service. These establishments span various cuisines and are renowned for their warm hospitality and welcoming ambiance, making them perfect for family gatherings, special occasions, or simply unwinding. Their extensive menus range from appetizers to indulgent desserts and wines and cocktails. This space is extremely fragmented and competition includes everything from publicly-traded companies owning multiple chains to single-location mom-and-pop restaurants.

Sales Growth

Denny's is a small restaurant chain, which sometimes brings disadvantages compared to larger competitors benefitting from better brand awareness and economies of scale.

As you can see below, the company's revenue has declined over the last five years, dropping 6.1% annually as it didn't open many new restaurants.

This quarter, Denny's missed Wall Street's estimates and reported a rather uninspiring 6.4% year-on-year revenue decline, generating $110 million in revenue. Looking ahead, Wall Street expects sales to grow 4.2% over the next 12 months, an acceleration from this quarter.

Here at StockStory, we certainly understand the potential of thematic investing. Diverse winners from Microsoft (MSFT) to Alphabet (GOOG), Coca-Cola (KO) to Monster Beverage (MNST) could all have been identified as promising growth stories with a megatrend driving the growth. So, in that spirit, we’ve identified a relatively under-the-radar profitable growth stock benefitting from the rise of AI, available to you FREE via this link.

Same-Store Sales

Same-store sales growth is an important metric that tracks organic growth and demand for a restaurant's established locations.

Denny's demand within its existing restaurants has generally risen over the last two years but lagged behind the broader sector. On average, the company's same-store sales have grown by 2.7% year on year. Given its flat restaurant base over the same period, this performance stems from increased foot traffic or larger order sizes per customer at existing locations.

In the latest quarter, Denny's same-store sales rose 1.3% year on year. By the company's standards, this growth was a meaningful deceleration from the 8.4% year-on-year increase it posted 12 months ago. We'll be watching Denny's closely to see if it can reaccelerate growth.

Key Takeaways from Denny's Q1 Results

The company's revenue and EPS unfortunately both missed analysts' expectations. On a brighter note, full year same store sales was maintained and full year adjusted EBITDA was raised slightly. Overall, this was a mixed quarter for Denny's. The company is down 4.9% on the results and currently trades at $7.62 per share.

Denny's may have had a tough quarter, but does that actually create an opportunity to invest right now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it's free.