What Happened?
Shares of diner restaurant chain Denny’s (NASDAQ:DENN) fell 5.6% in the afternoon session after the company reported weak second-quarter 2025 results that missed analyst estimates and revealed a decline in sales at its core brand. The restaurant chain posted earnings per share of $0.09, which missed the $0.11 consensus estimate and marked a nearly 31% drop from the previous year. A key concern for investors was the 1.3% decline in same-restaurant sales at its namesake Denny's locations, which signaled ongoing brand pressure. During the earnings call, CEO Kelli Valade attributed the weakness to a "very choppy consumer environment" where households reduced spending. The company also faced shrinking profit margins due to rising ingredient costs. In response to the results, Piper Sandler kept a "Neutral" rating on the stock but slashed its price target to $4.00 from $6.00.
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What Is The Market Telling Us
Denny’s shares are extremely volatile and have had 37 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 8 days ago when the stock gained 3.1% on the news that the company announced it was considering a plan to refinance its existing debt. The restaurant operator stated that the potential transactions would refinance nearly all of its existing debt, which was due in August 2026. At the end of the first quarter, Denny's reported total debt of $276.2 million. Such a move was likely viewed favorably by investors as it could lead to better terms and increased financial flexibility for the company. Adding to the positive sentiment, recent filings showed that institutional investors like Envestnet Asset Management had increased their holdings in the company, signaling growing confidence in the stock.
Denny's is down 45.2% since the beginning of the year, and at $3.44 per share, it is trading 53.5% below its 52-week high of $7.39 from November 2024. Investors who bought $1,000 worth of Denny’s shares 5 years ago would now be looking at an investment worth $372.56.
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