What Happened?

Shares of diner restaurant chain Denny’s (NASDAQ:DENN) fell 22% in the morning session after the company reported weak fourth-quarter results as its revenue fell short of Wall Street's estimates. Its full-year EBITDA guidance also missed significantly. The company's decision to accelerate restaurant closures reduced its overall footprint, putting more pressure on existing locations to drive sales growth. Given these moves, its full-year same-restaurant sales guidance suggests little to no growth. Overall, this quarter could have been better.

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What The Market Is Telling Us

Denny’s shares are very volatile and have had 23 moves greater than 5% over the last year. But moves this big are rare even for Denny's and indicate this news significantly impacted the market’s perception of the business. 

The biggest move we wrote about over the last year was 4 months ago when the stock dropped 17.6% on the news that the company reported weak third-quarter earnings results, with revenue, adjusted EPS, and EBITDA falling short of Wall Street's estimates. Guidance was also weak, with EBITDA guidance for the full year falling below consensus estimates. Management doesn't expect material improvement in the consumer and economic environment and continued to close restaurants with low volumes. Overall, this was a softer quarter.

Denny's is down 14.5% since the beginning of the year, and at $5.36 per share, it is trading 48.2% below its 52-week high of $10.34 from February 2024. Investors who bought $1,000 worth of Denny’s shares 5 years ago would now be looking at an investment worth $263.91.

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