) recently reported fourth quarter 2012 earnings of 7 cents per
share, in line with the Zacks Consensus Estimate but below the
year-ago quarter's earnings of 94 cents per share. In full year
of 2012, earnings per share were 23 cents versus $1.13 per share
recorded in 2011.
Total operating revenues declined 10.9% year over year to
$115.9 million, but surpassed the Zacks Consensus Estimate of
$112.0 million. In 2012, the revenues were $488.4 million, down
9.3% year over year.
Performance Highlights in the Quarter
During the quarter, sales at the company-operated restaurants
declined 16.9% year over year to $81.7 million, as the number of
operating units have reduced annually by 49 owing to the
Franchise and license revenues increased 7.5% to $34.2
million, attributable to an improvement in royalties as well as
occupancies, propelled by 55 additional franchised restaurants in
operation at the end of the quarter in comparison with the
System-wide same-restaurant sales (comps) nudged up 1.7% based
on a 2.0% growth in franchised units and a 0.5% rise in
company-operated units. The 10 basis point (bps) improvement was
higher than a 1.6% growth in overall comps witnessed in the
year-earlier quarter. Same-store guest count fell 0.8% but guest
check average inched up 1.3%, while same-store guest count
exhibited a downward trend from the year-ago level, guest check
showed signs of improvement.
Company-operated restaurants' operating margin enhanced 70
basis points (bps) to 13.5% due to reduced payroll as well as
benefit expenses and other operating costs neutralizing the rise
. Franchise operating margin declined 30 bps to 65.2% owing to
low fee revenues. Hence, total operating margin expanded 310 bps
During the quarter, Denny's shut down one company-owned as
well as 11 franchised restaurants and also divested 8
company-owned units to franchisees. The company unveiled 12
franchised units in the quarter including one company-owned unit.
At quarter-end, the company had 164 company-owned and 1,524
franchised and licensed restaurants.
Denny's ended the quarter with cash and cash equivalents of $13.6
million and long-term debt of $161.5 million.
The company bought back 4.8 million shares worth $22.2 million
For 2013, Denny's projects that system-wide same-store sales
growth will be within the range of flat to 2%. Adjusted income
before taxes will be within $76-$80.0 million. Capital
expenditure will be between $17 million and $19 million. The
franchisor and operator of one of America's largest full-service
restaurant chains also expects that its free cash flow will be
within the range of $46.0-$49.0 million.
The company expects to introduce nearly 40-45 franchised
restaurants in 2013.
Denny's is still in the transitional stage and will take some
time to stabilize the operation both at company-owned and
franchised units. Continued margin expansion at company-owned
stores amid a value-sensitive business environment is another
positive factor. However, we are cautious about the stock given
the company's continued moderated results as well as slowdown in
Denny's currently retains a Zacks Rank #3 (Hold). Another
AFC Enterprises Inc.
) recently declared its preliminary fourth quarter and full year
2012 results. The company projects its adjusted earnings per
share for the full year of 2012 to be within $1.23-$1.24, up from
99 cents in 2011. AFC also provided an optimistic outlook for
2013. AFC currently holds a Zacks Rank #2 (Buy).
Other restaurateurs, which are expected to perform well moving
Krispy Kreme Doughnuts, Inc.
Burger King Worldwide, Inc.
). Both carry a Zacks Rank #2 (Buy).
AFC ENTERPRISES (AFCE): Free Stock Analysis
BURGER KING WWD (BKW): Free Stock Analysis
DENNY'S CORP (DENN): Free Stock Analysis
KRISPY KREME (KKD): Free Stock Analysis
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