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Investors Get Impatient With Dave & Buster’s Entertainment After a Ho-Hum Quarter

Restaurant, sports bar, and arcade chain Dave Buster’s Entertainment (NASDAQ:PLAY) got clobbered after reporting on its first quarter of 2019. It wasn’t that results were terrible; on the contrary, the company notched respectable top- and bottom-line growth compared with the year prior. However, the issue is how it achieved that growth. Consumers are receiving new store openings with some enthusiasm, but DB still hasn’t differentiated itself enough to create real needle-moving growth.

A few numbers for context

DB did notch near 10% total sales growth during the quarter, with amusements — the arcade games part of the business — leading the charge once again. However, food and labor costs rose faster, which meant earnings per share grew at a slower rate than the top line.

Data source: Dave Busters Entertainment. YOY = year over year.  

Most of those sales gains came from the 15 extra stores DB had in operation compared with the year prior. Removing those from the equation reveals that this is a restaurant chain with some challenges. That shows up in the company’s earnings before interest, tax, depreciation, and amortization (EBITDA), a better measure of DB’s profitability. EBITDA was up only 3.2% during the first quarter of the year, much lower than the pace of revenue growth.

Image source: Getty Images.

Good, but not nearly good enough

A major reason for DB’s struggles has to do with comparable-store sales — a combination of foot traffic and average dollars spent by guests. New location openings are doing well, but existing ones are a mixed bag. Amusements continue to rise, but food and beverage sales are dragging down what would otherwise be robust existing location performance.

Data source: Dave Buster’s Entertainment.

The combined 0.3% decline was better than the steep 4.9% drop in the

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