Denny’s(DENN)2022-08-03 02:41Financial Data and Key Metrics Changes - Denny's domestic system-wide store sales increased by 2.5% compared to 2021 and by 1.8% compared to 2019 [13] - Same-store sales growth in Q2 was 2.5%, driven by a 10% increase in guest check average, which included approximately 3.5% carryover pricing from the prior year and over 3% pricing taken in the current year [26] - Adjusted net income per share was 0.18 in the prior year quarter [35] Business Line Data and Key Metrics Changes - Franchise and license revenue increased by 65.9 million, with royalties and advertising revenue rising due to a 2.4% increase in domestic franchise same-store sales [28] - Company restaurant sales of 36,000, a 5% increase compared to the pre-pandemic second quarter of 2019 [27] Company Strategy and Development Direction - The company is focused on a clear barbell strategy of offering high-quality products while emphasizing value offerings, which is seen as a competitive advantage [16] - Denny's is actively working to return to 24-hour operations, which is expected to drive sales, particularly in late-night dining [14] - The acquisition of Keke's Breakfast Café is viewed as an opportunity to participate in the fast-growing A.M. Eatery segment [21] Management's Comments on Operating Environment and Future Outlook - Management noted that consumer confidence has been affected by inflationary pressures, but the brand's value positioning is expected to resonate with consumers [50] - There are early signs that commodity prices may have peaked, with expectations for easing in the third quarter [40] - The company anticipates third-quarter domestic system-wide same-store sales to be between 0% and 2% compared to 2021 [38] Other Important Information - The company allocated 168 million remaining under the existing repurchase authorization [36] - The kitchen modernization initiative is expected to enhance guest experience and operational efficiencies, with 50% of domestic units already equipped [19] Q&A Session Summary Question: Can you unpack the third quarter sales guidance? - Management indicated that sales typically trend down from Q2 to Q3 due to back-to-school seasonality, but they are seeing benefits from value messaging and 24/7 operations [47][49] Question: What is the current staffing situation? - Staffing levels have improved, with limited hour units now at approximately 80% to 85% staffing compared to pre-COVID levels [70] Question: How is the company addressing margin trajectory? - Management expects a decline in mix but believes that driving traffic through value offerings will ultimately enhance margins [58] Question: What is the expected contribution from Keke's? - The expected EBITDA contribution from Keke's is between 1.75 million per quarter, with growth anticipated as the integration progresses [82]