Denny’s(US:DENN)2024-07-31 02:27Financial Data and Key Metrics Changes - Total operating revenue for Q2 2024 was $115.9 million, a slight decrease from $116.9 million in the prior year quarter [38] - Franchise and license revenue was $61.6 million, down from $62 million year-over-year, primarily due to decreases in franchise occupancy revenue and franchise sales [38] - Adjusted EBITDA for the quarter was $20.3 million, with an effective income tax rate of 25.1%, compared to 23.8% in the prior year quarter [40] - Adjusted net income per share was $0.13, down from $0.15 in the prior year quarter [57] Business Line Data and Key Metrics Changes - Denny's domestic system-wide same-restaurant sales declined by 0.6%, with approximately 5% attributed to pricing and a negative impact from product mix related to increased value offerings [51] - Keke's delivered system-wide same cafe sales of negative 4.6% for the quarter, but the brand is narrowing the gap to the Florida index [52] - Company restaurant sales were $54.3 million, down from $54.9 million in the prior year quarter, primarily due to a decrease in same restaurant sales [54] Market Data and Key Metrics Changes - Denny's outperformed the BBI Family Dining Sales Index for the second consecutive quarter, indicating a strong competitive position despite a challenging environment [119] - The company noted that California, Texas, and Florida are key states where they continue to gain market share relative to BBI Family Dining Sales [17] Company Strategy and Development Direction - The company is focused on driving traffic through value initiatives, including the relaunch of the 2468 menu with an added $10 category, which is expected to drive incremental traffic and protect profitability [121][122] - Denny's is expanding its virtual brand, Banda Burrito, to over 300 restaurants, prioritizing California for additional revenue channels [127] - The company is also investing in local advertising, with a $12 million annual investment to enhance local media focus [128] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the impact of macroeconomic factors on the broader restaurant industry, adjusting 2024 domestic system-wide same restaurant sales guidance to between negative 1% and positive 1% [43] - The company expressed optimism about third-quarter sales trends, indicating that they are outpacing benchmarks and winning the summer with guests [17] - Management highlighted the importance of their barbell strategy in expanding share of wallet and driving traffic through value messages [120] Other Important Information - General and administrative expenses for Q2 totaled $20.5 million, slightly up from $20.2 million in the prior year quarter, driven by increased corporate administrative expenses [40] - The company allocated $4.7 million to share repurchases and invested $5 million in cash capital expenditures primarily related to Keke's development [41] Q&A Session Summary Question: Can you provide insights on the value mix and its impact on sales? - Management indicated that approximately 5% of sales were from pricing, with a slight negative impact from product mix due to increased value offerings [51][60] Question: How did same-store sales trends change from June to July? - Management reported that July showed a favorable trend, with a material improvement from June's decline of 1.5% [75] Question: Are there signs of consumers trading down to eating at home more? - Management acknowledged some changes in check sizes but noted effective in-restaurant merchandising strategies to offset potential trade-down effects [82][93] Question: What is the outlook for Keke's sales growth in the second half? - Management expressed optimism about Keke's growth trajectory, citing new openings and positive trends from recent menu changes [85][110] Question: How is the competitive environment affecting pricing strategies? - Management noted that the industry is experiencing a value war, but they believe their $2 to $10 menu will drive traffic and maintain profitability [99][100]