Amid competition, a challenging casual-dining market and hurricane-related closures, Dave & Buster’s Entertainment Inc. lowered sales guidance on Tuesday a full percentage point for 2017.
In a second-quarter earnings release, the Dallas-based big-box entertainment and restaurant operator projected same-store sales between 1 percent and 2 percent for the year, compared with earlier forecasts of 2 percent to 3 percent. Dave & Buster’s same-store sales base covers 76 of its 100 locations.
The company’s shares were trading about 9.5 percent lower at midday Wednesday.
Steve King, Dave & Buster’s CEO, said three factors led the company to reduce its outlook, led by “a casual-dining environment that seems to have been progressively worse” over the summer.
“While D&B’s differentiated experience across our four platforms — eat, drink, play and watch — has provided us with meaningful degree of separation from casual dining over the past several years, we are certainly not immune to the macro trends around us,” he said.
In addition, King told analysts on a conference call that the brand was seeing more competition from entertainment brands like Main Event, which opened five stores in the quarter in existing Dave & Buster’s markets, and Topgolf, which opened two.
“We did see a little more pressure on the competitive front in the quarter than we expected,” King said.
He added that the company was still assessing the impact of Hurricane Harvey in the Houston area, where the brand has three locations.
“We were shut down for a full week, and we’re back open, but not at full strength,” King said. “We provided some room to accommodate some underperformance in the Houston area.”
The bigger issue, he said, will be “more about how those communities are able to recover, or whether people are going out and dining and going to entertainment plans and that sort of thing, more so than it is kind of whether or not we’re prepared to handle the traffic.”
For the second quarter ended July 30, Dave & Buster’s reported that net income rose 41.1 percent, to $30.4 million, or 71 cents per share, from $21.5 million, or 50 cents per share, the previous year. Revenue rose 14.9 percent, to $280.8 million, from $244.3 million the previous year.
During the quarter, food and beverage revenue increased 10.2 percent, to $118.7 million, from $107.7 million. Amusement and other revenue increased 18.6 percent, to $162.1 million, from $136.7 million.
Food and beverage revenue represented 42.3 percent of total revenue, compared with 44.1 percent of total revenue in the same quarter last year.
King said Dave & Buster’s was “taking a thoughtful approach to reignite the momentum” in food and beverage.
“In recent weeks, we began highlighting our Eat & Play Combo promotion on national television,” he said. “We are also conducting tests that will help inform our F&B strategy going forward, but we are still in the early stages of reading those results.”
The company has offered the Eat & Play Combo for more than 10 years, but the value messaging is being resurrected.
“We want to make sure everybody is aware of the value opportunities that we have out there,” he said.
The chain is also running an All You Can Eat Wings promotion for the first six Sunday, Monday and Thursday games NFL season for $19.99.
King said Dave & Buster’s is also preparing to test some technology initiatives, such as pay at the table and handheld ordering to “improve both the speed of service and overall guest satisfaction.”
The company opened four new locations in the second quarter, including its first unit in New Orleans. Nine units are under construction, King said, and the company has 27 signed leases into 2019.
With real-estate developers looking for entertainment-based options, Dave & Buster’s said it expected to open 14 new locations this year, ahead of the 12 it expected earlier.
“Of these stores, eight will be in new markets for Dave & Buster’s, with the remaining six located in markets where we already have a brand presence,” King said. “In terms of square footage, we expect 10 large stores this year, including eight that are right at that 40,000-square-foot size, two that are between 30,000 and 40,000 square feet, and the remaining four stores will be our small format of 30,000 square feet or less.”
Dave & Buster's Entertainment, which opened its first venue in 1982, owns and operates 100 locations in 34 states and Canada.
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