What Happened?
Shares of diner restaurant chain Denny’s (NASDAQ: DENN) jumped 5.9% in the afternoon session after the company announced plans for a massive expansion across the UK.
The move follows the success of its first UK restaurant in Swansea, which opened eight years ago as a "proof-of-concept" location. This single diner serves over 13,500 customers annually and has generated "strong margins," demonstrating the brand's potential. The company's UK franchise holder is now collaborating with FRP Corporate Finance to find partners to acquire the restaurant's brand rights on British soil. The expansion strategy targets high-traffic areas like high streets, airports, and service stations, with potential for new models including drive-thrus, signaling a significant growth opportunity for the company.
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What Is The Market Telling Us
Denny’s shares are extremely volatile and have had 38 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 3 days ago when the stock dropped 5.8% on the news that the August jobs report came in significantly weaker than anticipated, sparking fears of a slowdown in consumer spending. The U.S. economy added only 22,000 jobs last month, a stark miss from expectations, while the unemployment rate ticked up to 4.3%, its highest level since late 2021, according to the Bureau of Labor Statistics.
For the restaurant industry, which relies heavily on discretionary spending, a weak labor market is a major red flag. When fewer people are employed or are worried about their job security, non-essential expenses like dining out are often the first to be cut from household budgets. The report raises concerns that consumers will tighten their belts, leading to lower traffic and sales for restaurant chains across the board.
Denny's is down 21.8% since the beginning of the year, and at $4.90 per share, it is trading 33.7% 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 $444.75.
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