Denny’s Hits a Lucky 7 Milestone

Denny’s continues to impress.

Jun 1, 2014 at 8:02AM

Source:  Denny's Corporation

If you think of Denny's (NASDAQ:DENN) as a mature diner chain with little-to-no growth ahead, then you are wrong. Denny's reported an impressive first quarter, including a milestone, and dropped hints that the good times will continue.

The grand slam results
On April 28, Denny's reported fiscal first-quarter results. Sales at company-owned domestic restaurants popped 3.2%. For franchisees, they rose 1.5%. Net income was $6.4 million, or $0.07 per diluted share, along with adjusted free cash flow of $6.7 million. It was the 11th quarter out of the last 12 of positive same-store sales gains, and it was the strongest quarter of same-store sales gains at company-owned restaurants in more than seven years.

John Miller, president and CEO of Denny's, credited the gains to the company's "Heritage remodel program" that is helping to drive increased guest traffic. He also credited Denny's efforts toward improvements in "food, service[,] and atmosphere to evolve the business." The same-store sales increase for company-owned spots would have been even better, but its highest volume location in Las Vegas is currently closed during a remodel.


Source: Denny's Corporation

Looking to the outfield
Mark Wolfinger, Denny's CFO, pointed out that the single Denny's in Las Vegas had $7.9 million in sales and $2.9 million in pre-tax operating income in 2013, so its shutdown is a temporary but large blow. The good news is that the landlord is funding the remodel along with a new long-term lease. The restaurant is expected to reopen in 2015.

Remodels are key to Denny's growth. The company expects 2014 same-store sales increases of between 2% and 3% for company-owned locations and between 1% and 2% for franchisees. This compares to previous guidance of between 1.5% and 2.5% for company-owned restaurants and zero to 1% for franchisees. Total adjusted earnings before interest, taxes, depreciation, and amortization are expected to be between $77 million and $79 million with adjusted free cash flow of between $44 million and $47 million.

During the conference call, CEO Miller explained why the company-owned locations are growing faster than the franchisees. It is simply due to the fact that their remodels are happening faster. Denny's remodels include giving restaurants a "contemporary diner feel." The restaurants that undergo the remodels tend to see an instant boost in sales.

The exciting part for potential growth is therefore with the franchisees. Approximately 70% of them are due for a remodeling -- and are required to do so -- over the next five years. As they are rolled out in a steady fashion, this should add a positive tailwind to the growth in systemwide same-store sales, especially among the franchisees just as we are witnessing with the company-owned locations. Miller stated, "Our franchisees are doing a great job adopting, implementing and rolling out this program as one would expect."

According to Miller, post-remodel the restaurants see on average "sort of mid-single digit" percentage growth. He believes this is due to curiosity as well as the fact that frequent customers tend to increase their visits even more with the remodels, especially at dinner time. That makes sense if you think about it, as the dinner crowd tends to have higher expectations for atmosphere than the breakfast and lunch crowds.


Source: Denny's Corporation

Foolish final thoughts
One thing particularly interesting was that Denny's refused to blame the weather. It was only when really pushed in the conference call that anybody at Denny's would even acknowledge that the weather had some negative effect. Given that it did, yet the company-owned spots had their best quarter in seven years, illustrates just how much the remodel program strengthens the brand. While I doubt Denny's will make you rich, the stock deserves a closer look.

New way to pay your Denny's bill
The plastic in your wallet is about to go the way of the typewriter, the VCR, and the 8-track tape player. When it does, a handful of investors could stand to get very rich. You can join them -- but you must act now. An eye-opening new presentation reveals the full story on why your credit card is about to be worthless -- and highlights one little-known company sitting at the epicenter of an earth-shaking movement that could hand early investors the kind of profits we haven't seen since the dot-com days. Click here to watch this stunning video.

Nickey Friedman has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

©1995-2014 The Motley Fool. All rights reserved. | Privacy/Legal Information