Like the new giant-sized Rock’em Sock’em Robots game that will roll out this quarter, Dave & Buster’s Entertainment Inc. swung a strong punch with sales in the third quarter and avoided the rope-a-dope of casual-dining trends.
Dallas-based Dave & Buster’s on Tuesday reported same-store sales increased 5.9 percent in the third quarter ended Oct. 30. That lapped an 8.8 percent same-store sales increase in the prior-year period.
“Although we are certainly not immune to the macroeconomic environment,” said Stephen King, Dave & Buster’s CEO, in a post-earnings analyst call Tuesday, “the uniquely customizable experience we provide across four platforms — eat, drink, play and watch — provides us with some degree of insulation from casual-dining trends and that certainly played out this quarter.”
Proprietary games, like the anticipated boxing robots this quarter and beanbag-game-inspired Tailgate Toss in the third quarter, are helping Dave & Buster’s maintain forward sales momentum, King said.
In the most recent quarter, Dave & Buster’s same-store amusement sales grew 10.4 percent, food sales inched up 0.8 percent and beverages rose 0.6 percent, the company reported.
“We’ll continue to pursue games that have these exclusive windows and to market them on national TV,” said King. “More recently, we've begun unveiling new and improved dimension of proprietary games that will be exclusive to us on a permanent basis. Our first proprietary game, Star Trek made a summer game debut in the latter part of Q2. The game immediately became our second highest grossing game off and rising to No. 1 on our daily ranking since then.”
Dave & Buster’s is also starting to develop its own games, with the inaugural version, Rock’em Sock’em Robots, to debut in this fourth quarter. Dave & Busters developed the title, from licensing to content through design, manufacture, distribution and operation, King said.
“D&B has conceived and delivered a product that will have our guests returning for countless robot battles between our life-size Red Rocker and Blue Bomber,” King said.
Brian Jenkins, Dave & Buster’s chief financial officer, added that proprietary games give the brand added advantages, including being the sole place where consumers can find and play games like Rock'em Sock'em or Star Trek.
“It's just a further evolution of that strategy, and we think it's reason why you see kind of amusement comps we have,” Jenkins said.
For the third quarter ended Oct. 30, Dave & Buster’s reported income of $10.8 million, or 25 cents a share, compared to $4.6 million, or 11 cents a share, in the same quarter a year ago. Revenues increased 18.6 percent, rising to $228.7 million from $192.8 million in the prior-year quarter.
“Strong 3Q results across-the-board showed the unique differentiation” of Dave & Buster’s model with games, amusements and sports view, said Andy Barish, an analyst with Jeffries.
King said the company saw “a very strong performance in the lunch and afternoon daypart,” which outperformed the dinner and late-night dayparts.
Given the third-quarter performance, Dave & Buster’s increased its guidance for the year’s financial results. The company said it expected revenues in the range of $998 million to just more than $1 billion, up from earlier guidance of from $983 million to $995 million. Projected same-store sales growth for the full year was raised to between 3.1 percent and 3.6 percent, up from previous guidance of 2.25 percent to 3.25 percent.
Dave & Buster’s said it was also now targeting 11 new-store openings, at the high end of its expected range. The company has opened 10 stores already this year and expects a new unit in Daly City, Calif., to open before the end of 2016.
Barish of Jeffries said Dave & Buster’s development pipeline has 23 signed leases and nine units under construction.
King noted that “our position as a premier, sought-after entertainment and dining concept enables us to tap into an increasing supply of real estate that meets our criteria.”
Dave & Buster’s units range between 25,000 and 45,000 square feet.
The company has 91 venues in 33 states and Canada.
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Photo courtesy of Dave & Buster's