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Denny's Corporation (DENN) announced it financial results on Thursday for the third quarter ended September 30, 2009.
Total operating revenue for the third quarter, including company restaurant sales and franchise revenue, was $146.1 million compared with $189.3 million in the prior year quarter. Same-store sales decreased 6.6% at company units and 7.3% at franchised units during the quarter. The Company reported net income of $10.0 million for the third quarter, or $0.10 per diluted common share, compared with prior year period net income of $10.6 million, or $0.11 per diluted common share. This beat the estimate from analysts of $0.07 per share.
Mark Wolfinger, CFO of Denny's, commented in a conference call, "Our 7.3% decline in guest counts was partially offset by an 0.8% increase in average guest check. Our guest counts have been negatively impacted in the areas of the country that have been hardest hit by economic conditions, specifically California, Arizona and Florida. These areas account for 41% of our system units. Most of the growth in guest check was attributable to pricing actions taken to help counter commodity and labor cost pressures."
Nelson Marchioli, President and CEO of Denny's, explained, "We continue to execute toward our strategic goals of building new units, refranchising company units, paying down debt and growing profitability. Our ability to accomplish these goals, despite the ongoing same-store sales challenges faced by the industry, is evidence of the brand strength of Denny's. Our ongoing transition to a more franchise-based business model, inclusive of a more effective organizational structure, has allowed us to deliver profit growth predictably and consistently. Our transition has increased our operating margins, earnings power and system unit growth, while lowering both our business and financial risk."
He noted, "Since mid-2006, we have paid down $248 million, or 45% of our debt."
Mr. Marchioli added, "In an environment where the restaurant and retail industries are reducing development, we saw the opening of 9 new franchise units in Q3. In the past 12 months, Denny's has opened 42 new units. Of these, 41 have been opened by franchisees. This represents the most openings for the brand since 2001 and is a testament to our brand strength."
He explained, "Over 50% of all of our menu items sold at Denny's are breakfast items. Our competitive differentiation is based on our 'real breakfast' offering and will remain a focus for us. Our 'Build-Your-Own Grand Slam' item is ordered five times more than our next most popular entree. It also has a very attractive food cost, and it has supported our food margin rate objectives and improvement. "
The Company expects FY09 same-store sales for franchise stores at the low end of a (5.0%) to (3.0%) range, and (3.75%) to (3.0%) for company-owned stores. The Company increased its expectation for FY09 adjusted net income to $21 to $22 million from the previous range of $15 to $20 million.
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