Denny's Shares Plunge Following Disappointing Q4 2024 Results

Denny's shares plummeted 22% after revealing troubling Q4 2024 financial results and outlook. Investors are concerned about declining sales and increasing restaurant closures, further jeopardizing the company's profitability.

Date: 13-02-2025

AI Rating: 3

Financial Performance Overview: Denny's reported a significant drop in its share price following the release of its Q4 2024 financial results. The stock was down 22%, nearing a decade-low due to troubling update regarding the performance of many of its locations.

One of the notable points is the company's same-store sales, which declined less than 1% for its flagship brand. However, this figure does not account for the closures, leaving the impression that remaining locations are struggling to generate sales growth. Moreover, the company faced a serious issue with underperforming restaurants, closing 88 in 2024, and planning to close another 70 to 90 in 2025. The closures are indicative of a larger trend affecting franchise profitability and overall revenue growth.

Sales Trends: Management announced a 5% drop in same-store sales in early 2025, with expectations for a full-year decline of up to 2%. Such negative trends in same-store sales highlight a concerning trajectory for revenue growth and profitability moving forward.

Profit Margins and Future Outlook: The future does not appear bright for Denny's unless a significant change in business strategy occurs to stimulate growth and improve profit margins. The company's reliance on new location openings (14 opened in 2024 with plans for 25-40 in 2025, including its smaller Keke's brand) will be critical as it seeks to revitalize its brand in more favorable locations. Yet, the existing sales trends may overshadow these efforts and hinder any recovery in profit margins.

Investors are understandably cautious, as the company needs to demonstrate a clear path to growth and increased profitability to regain confidence.

Stocks: DENN