Denny’s saw a slowdown in same-store sales for the quarter, which the company partially blamed on a highly competitive value environment.
It also came during a quarter where family-dining rival IHOP took center stage nationally with its IHOb name change publicity stunt. For the quarter ended June 27, Denny’s reported a 0.7 percent drop in systemwide same-store sales. In the previous quarter, ended March 28, the Spartanburg, S.C.-based family-dining chain reported a 1.5-percent uptick in U.S. systemwide same-store sales.
Domestic company and franchise stores both saw dips in comparable sales, with decreases of 0.1 percent and 0.8 percent, respectively. Denny’s reported net income of $11.6 million, or 18 cents per share, up from $8.7 million, or 12 cents per share, in the prior year’s same quarter.
CEO John Miller said Denny's generated strong cash flows during the second quarter, but was challenged “by a formidable year-ago comparison, a negative holiday shift and a highly competitive value environment.”
Regardless of the results, Miller said the company’s mission remains the same: entice diners with higher-quality menu items and push Denny’s on Demand to drive off-premise sales.
Still, adjustments had to be made to combat the sluggish sales. Specifically, Miller said the chain lost visits from diners trading down to dollar deals at quick-service chains, such as Wendy’s, and trading up to 2 for $20 specials at casual-dining chains. He did not mention IHOP’s burger rebranding stunt.
Denny’s responded to the industry-wide discounting by introducing a $5.99 Super Slam deal in early June. The combo deal includes two buttermilk pancakes, two sunny side up eggs, two bacon strips, two sausage links and hash browns.
“We did a course correction,” Miller said.
Miller said the Super Slam deal is contributing to stronger sales at breakfast and lunch, but dinner remained soft.
On Denny’s on Demand, Miller said the company continues to show strength in off-premise sales. At company-operated stores, off-premise sales represented 10 percent of total sales and 9.5 percent of sales at franchise stores.
Roughly 60 percent of the company’s 1,600 domestic restaurants offer delivery through at least one third-party provider. Miller said delivery sales are “highly incremental” and skew heavily toward diners ages 18 to 34.
On the menu side, Miller said Denny’s will continue to elevate its offerings. This week, he said Denny’s has added three new burgers to its Burger Town, U.S.A. lineup: America’s Diner Cheeseburger, a Spicy Sriracha Burger and a Bacon Avocado Cheeseburger.
The chain’s focus on food quality has been part of a brand overhaul that also included store remodeling. During the quarter, Denny’s completed 51 remodels. The contemporary Heritage design has been a “significant tailwind” for the company, Miller said.
He said 74 percent of the company’s restaurants have adopted the new look, with 80 percent expected to have the update by the end of the year.
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