Dave & Buster’s Entertainment Inc., the restaurant and arcade operator, is trimming costs with new electronic-ticket technology and anticipates using the platform for promotions, the company said Tuesday.
The Dallas-based operator said the opt-in rate for the new e-tickets was higher than projected and reduced redemption costs significantly in its arcades.
“The opt-in rate for guests is over 90 percent, and since completing the conversion early in the third quarter, amusement satisfaction scores remain quite strong,” said Steve King, Dave & Buster’s CEO, in a call with analysts. The electronic ticket conversion contributed to a 250-basis-point improvement in cost of sales during the fourth quarter ended Jan. 31, he added.
Brian Jenkins, Dave & Buster’s chief financial officer, said the concept is seeing its sales mix shift toward “the more profitable gaming side of our business.”
Jenkins said amusement and other sales grew 16.3 percent in the fourth quarter, while food and beverage sales increased 9.9 percent.
“During the fourth quarter, amusement and other sales represented 51.7 percent of total revenues, reflecting 140-basis-point increases from the prior year period,” Jenkins told analysts.
Overall, same-store sales in the quarter increased 6 percent. Of that, amusements rose 8.5 percent, food sales increased 3.6 percent and bar business grew 3.2 percent, the company said.
Nicole Miller Regan, senior research analyst at Piper Jaffray, wrote in a note: “The Dave & Buster's system continues to outperform the industry in terms of same-store sales.”
Profit in the fourth-quarter rose 56.5 percent, to $23 million, or 53 cents per share, compared with $14.7 million, or 34 cents per share, in the same period last year. Revenue rose 13.1 percent in the quarter, to $234.2 million.
King said same-store sales gains in the fourth quarter were primarily driven by walk-in-sales, which grew at a rate of 6.9 percent. The special-event business increased 1.8 percent.
Dolf Berle, Dave & Buster’s president and chief operating officer, said the company plans to continue targeting young adults, especially in the core market of those 21 to 39 years old.
“They also have a passion for sports viewing in a social setting,” Berle said. “In addition to this audience, we try to appeal to two secondary targets, which are families who visit us on walk-in base and corporations having party events.”
The strategy is to launch new games, foods and drinks three times a year, he said.
“We are also excited to explore the possibility of promotions enabled by our new e-ticket technology,” he said, which are color coded to the power cards. “Today at D&B, you will see green swipes on a redemption games and blue swipes on the simulators. Promotions aimed at these different categories have the potential to feature certain games or play types, and we will capitalize on this new capability in 2016.”
Berle said the research and development and marketing teams would continue to roll out new products, which he said are important to the brand as “35 percent of total food sales consist of items that were introduced in the last four years.”
Popular items introduced in 2015 were the Hottie Burger, the Buffalo Wing Burger and the Tower Dessert, he said.
Dave & Buster’s opened 10 locations in fiscal 2015, and plans nine to 10 openings in 2016, executives said.
King said three of the locations this year will be 30,000 square feet or less, three will be 40,000 square feet, and the three to four remaining venues will be between 32,000 square feet and 36,000 square feet.
He said a number of sites are available as retailers like Macy’s, Sears and Sports Authority close big-box stores, especially in shopping malls.
“I will say malls are not dead,” King noted. “Actually, our mall stores are performing well. … I think that mall developers are pivoting towards a bit more entertainment as they are going after trying to replace these folks and so we are an attractive alternative for them.”
Dave & Buster's has 82 locations in 30 states and Canada.
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