Why Denny's Stock Tumbled by 16% This Week

The persistently rising price of a key input was the main factor behind the recent sag in Denny's (NASDAQ: DENN) stock. Investors weren't very forgiving this week, as according to data compiled by S&P Global Market Intelligence, they traded the company's shares down by nearly 16% over the period.

Not so egg-cellent

For the most part Denny's is, famously, a slinger of breakfast meals. In America, breakfast very often involves an egg dish, hence the food's importance for the company. This is why it is vulnerable to the U.S.'s current egg shortage.

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Towards the end of February, management attempted to mitigate this by imposing an egg surcharge on meals containing the protein. This wasn't universal, though; it was levied on a case-by-case basis, in certain markets and restaurant locations.

This is in contrast to similar moves made by other restaurant operators. Waffle House, for example, imposed a surcharge of $0.50 per egg for each of its approximately 2,100 locations in early February. It's probable that investors considered such actions to be effected more quickly, thoroughly, and definitively than Denny's move.

The elephant in the room

Denny's also hasn't impressed with its recent results, and that lingering sentiment isn't helping with the worsening egg situation.

It published its fourth-quarter and 2024 results in mid-February, revealing a slide in both revenue and GAAP net profitability for the year. In that earnings release it didn't specifically address the egg shortage, and the food received barely any mentions in management's conference call discussing the financials.

Until either the egg situation improves, or Denny's more specifically addresses its effects, we can expect investors to remain cold on the storied restaurant stock.

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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.