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Denny’s 1Q sales drop

Company looks to limited-time offers, value to drive sales after first decrease in nearly two years

Denny’s Corp. is looking to successful limited-time offers balanced with everyday value to drive sales, company officials said after reporting a systemwide sales decrease in the first quarter.

Systemwide same-store sales dropped 0.7 percent, the first quarter in nearly two years in which Denny’s same-store sales decreased, chief executive and president John Miller said.

The family-dining chain’s limited-time Baconalia promotion, which features bacon-centric items including an ice cream sundae and a branded Hobbit movie menu, helped drive traffic in the quarter, Miller said.

“We’re just getting through the noise of Q1,” Miller said. “It’s a choppy recovery…but it is a recovery never the less.

“Challenges aside, our performance is a testament to our franchise-focused business model and the improvements we’ve made to date,” he said. “We continue to balance our strong everyday value message with compelling limited-time offerings. 

The company began 2013 with an “abundant value proposition,” Miller said, including Denny’s three-course Complete Skillet Meals starting at $8.99. Dinner entrée purchases increased during the quarter, he said, with 25 percent of dinner guests ordering an entrée.

The first quarter of 2012 was the company’s strongest quarter last year, Miller said Tuesday in a call with analysts. This year, higher gas prices, payroll tax increases and delayed tax returns marred first-quarter results by negatively impacting consumer confidence, he said.

Net income for the quarter ended March 27 increased 20.7 percent to $7.1 million, or 7 cents per share, up from $5.9 million, or 6 cents per share, the prior year. Total operating revenue for the quarter decreased to $114.5 million from $126.7 million the prior year quarter.

Denny’s same-store sales decreased 0.5 percent at domestic franchised locations and 1.5 percent at company-owned restaurants. For the full year 2013, the company expects systemwide same-store sales growth between flat and 1.5 percent, while opening 40 to 45 new restaurants.

Miller said he’s optimistic about the remainder of 2013 due to positive signs in three key markets of California, Texas and Arizona.

Will Slabaugh, vice president and equity research analyst, restaurants, at Stephens Inc. wrote in a report that the first quarter was a testament to the stability of Denny’s franchised model.

“While the impact on food costs was a slight negative, we believe [management’s] continued emphasis on affordability with the recurrent use of limited-time offers makes the brand more resilient and should allow Denny’s to continue to withstand an uncertain economic and competitive environment,” he wrote. “We look for comp growth of over one percent in each of the remaining quarters in 2013."

Spartanburg, S.C.-based Denny’s has nearly 1,700 franchised, licensed and company-owned restaurants systemwide.

Contact Erin Dostal at [email protected].
Follow her on Twitter: @ErinDostal

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