Dave & Buster’s Entertainment, Inc. (Nasdaq: PLAY) dropped more than 8 percent on Wednesday, a day after the food-and-games company reported lackluster second-quarter revenue and lowered full-year sales guidance for PLAY stock.
Dave & Buster’s reported second-quarter earnings of 59 cents per share, topping consensus analyst expectations of 55 cents per share. However, quarterly revenue of $280.8 million came up just shy of consensus estimates of $281.7 million. In addition, the company reported same-store sales growth of only 1.1 percent.
Dave & Buster’s had previously guided for full-year same-store sales growth in the 2 to 3 percent range. Management lowered that full-year guidance range on Tuesday to only 1 to 2 percent growth. PLAY also lowered its fiscal-year 2017 earnings before interest, tax, depreciation and amortization guidance from a range between $276 million and $282 million to a new range between $270 million and $276 million.
In the company’s earnings release, CEO Steve King accentuated the positives from the quarter.
“We delivered another successful quarter of revenue growth driven by double-digit unit expansion and positive comparable store sales, a testament to the underlying strength of the brand,” King said.
On the company’s earnings call on Tuesday, King admitted that same-store sales “came in lower than expectations” in the second quarter due to a challenging casual dining market.
The company also revealed it was minimally impacted by Hurricane Harvey. Texas is a large market for Dave & Buster’s, but the company closed just three Houston locations due to the storm, all of which reopened on Sept. 1.
In a new note to clients on Wednesday, Wells Fargo analyst Jeff Farmer focused on Dave & Buster’s unit growth and strength in its amusement segment. Amusement same-store sales were up 4.7 percent on the quarter, while food sales fell 3.5 percent and beverage sales dropped 3.3 percent. The company plans to open a total of 106 new locations in 2017.
“PLAY’s differentiated concept continues to drive market share gains, giving management confidence to accelerate the pace of unit growth for 2017,” Farmer says.
“Unfortunately, [third-quarter same-store sales] are likely to be challenged, in our view, given continued weakness in the casual dining sector, higher competitive openings … and negative impact related to Hurricane Harvey.”
Wells Fargo estimates…
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