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High Costs Likely to Hurt Dave & Buster's (PLAY) Q4 Earnings
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Dave & Buster’s Entertainment, Inc. (PLAY - Free Report) is scheduled to report fourth-quarter fiscal 2017 results on Apr 3, after market close.
A unique business model with customizable guest experience across platforms gives the company a competitive edge. Dave & Buster’s also generates favorable store economics and strong returns as it offers a wide range of recreational options like games, live sports and other televised events alongside restaurant operations, as part of sales building. These are likely to reflect in the to-be-reported quarter’s sales.
However, high costs associated with restaurant operations might have dented fourth-quarter earnings.
Also, in a press release on Jan 8, 2018, the company revealed that it had a slower-than-expected start to the fourth quarter. Generally, restaurant sales witness an uplift in the month of December, but Dave & Buster’s trends in the month softened. This has led to management lowering the fiscal 2017 outlook.
Notably, shares of the company have lost 31.1% over the last year, substantially underperforming 9.9% growth of the industry it belongs to.
Let’s look at how the company’s fourth-quarter results will shape up.
Distinct Business Style & Sales-Building Initiatives to Aid Top Line
Apart from food and beverages, Dave & Buster’s entertainment business has been driving growth. In fact, in the first nine months of fiscal 2017, amusement and other accounted for 55.6% of total revenues, and grew 17.1% year over year. This is because, increased dependence on gaming has cushioned the company from the headwinds, pressurizing the broader restaurant industry of late, and is in turn driving market share and comps. The upward trend in sales is likely to continue in the fourth quarter as well.
Subsequently, the Zacks Consensus Estimate for sales in the to-be-reported quarter is pegged at $304.6 million, mirroring 12.7% year-over-year growth.
Meanwhile, menu innovation is another key attributor of the riveting growth potential of the restaurant. Dave & Buster’s also drives traffic by enhancing in-store and out-of-store customer experience, via digital and mobile strategic initiatives.
Rising Costs Likely to Affect Margins
Like most other restaurant operators, Dave & Buster’s has been bearing the brunt of increased labor costs from Obamacare. Further, the company’s non-franchised model makes it susceptible to increased expenses. Since all the restaurants are owned and operated by Dave & Buster's, instead of signing franchise agreements and putting the burden of costs on the franchisee, the company is solely responsible for the expenses of operating the business.
Moreover, pre-opening costs of outlets, given the company’s unit expansion plans and expenses related to sales initiatives are adding to the costs, and likely to hurt profits. Total operating costs in the first nine months of fiscal 2017 increased 13.1% and is expected to further rise in the to-be-reported quarter. This in turn is likely to affect margins and earnings.
Subsequently, the consensus estimate for earnings in the fourth quarter is pegged at 61 cents, reflecting a 3.2% year-over-year decline.
Our Quantitative Model Does Not Predict a Beat
Dave & Buster’s does not have the right combination of two main ingredients — a positive Earnings ESP and a Zacks Rank #3 (Hold) or higher — for increasing the odds of an earnings beat.
Zacks ESP: The company has an Earnings ESP of +1.38%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: However, the restaurant has a Zacks Rank #4 (Sell).
As it is, we caution against stocks with a Zacks Rank #4 or 5 (Sell-rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Peer Releases
Chipotle Mexican Grill (CMG - Free Report) posted mixed fourth-quarter 2017 results, with adjusted earnings of $1.34 per share, surpassing the consensus estimate of $1.32 by 1.5%. Earnings also grew 143.6% year over year on lower costs and higher revenues.
McDonald's (MCD - Free Report) reported fourth-quarter 2017 adjusted earnings per share (EPS) of $1.71, beating the consensus mark of $1.59 by 7.5%. Earnings improved 19% from the year-ago quarter (16% in constant currency). The upside reflects strong operating performance and G&A savings.
Domino’s (DPZ - Free Report) fourth-quarter 2017 earnings matched the Zacks Consensus Estimate while revenues missed the same. Adjusted earnings came in at $1.94 per share and improved 31.1% from the year-ago quarter on higher net income and lower share count, as a result of share repurchases.
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Zacks has just released Cybersecurity! An Investor’s Guide to help Zacks.com readers make the most of the $170 billion per year investment opportunity created by hackers and other threats. It reveals 4 stocks worth looking into right away.
Image: Bigstock
High Costs Likely to Hurt Dave & Buster's (PLAY) Q4 Earnings
Dave & Buster’s Entertainment, Inc. (PLAY - Free Report) is scheduled to report fourth-quarter fiscal 2017 results on Apr 3, after market close.
A unique business model with customizable guest experience across platforms gives the company a competitive edge. Dave & Buster’s also generates favorable store economics and strong returns as it offers a wide range of recreational options like games, live sports and other televised events alongside restaurant operations, as part of sales building. These are likely to reflect in the to-be-reported quarter’s sales.
However, high costs associated with restaurant operations might have dented fourth-quarter earnings.
Also, in a press release on Jan 8, 2018, the company revealed that it had a slower-than-expected start to the fourth quarter. Generally, restaurant sales witness an uplift in the month of December, but Dave & Buster’s trends in the month softened. This has led to management lowering the fiscal 2017 outlook.
Notably, shares of the company have lost 31.1% over the last year, substantially underperforming 9.9% growth of the industry it belongs to.
Let’s look at how the company’s fourth-quarter results will shape up.
Distinct Business Style & Sales-Building Initiatives to Aid Top Line
Apart from food and beverages, Dave & Buster’s entertainment business has been driving growth. In fact, in the first nine months of fiscal 2017, amusement and other accounted for 55.6% of total revenues, and grew 17.1% year over year. This is because, increased dependence on gaming has cushioned the company from the headwinds, pressurizing the broader restaurant industry of late, and is in turn driving market share and comps. The upward trend in sales is likely to continue in the fourth quarter as well.
Subsequently, the Zacks Consensus Estimate for sales in the to-be-reported quarter is pegged at $304.6 million, mirroring 12.7% year-over-year growth.
Meanwhile, menu innovation is another key attributor of the riveting growth potential of the restaurant. Dave & Buster’s also drives traffic by enhancing in-store and out-of-store customer experience, via digital and mobile strategic initiatives.
Rising Costs Likely to Affect Margins
Like most other restaurant operators, Dave & Buster’s has been bearing the brunt of increased labor costs from Obamacare. Further, the company’s non-franchised model makes it susceptible to increased expenses. Since all the restaurants are owned and operated by Dave & Buster's, instead of signing franchise agreements and putting the burden of costs on the franchisee, the company is solely responsible for the expenses of operating the business.
Moreover, pre-opening costs of outlets, given the company’s unit expansion plans and expenses related to sales initiatives are adding to the costs, and likely to hurt profits. Total operating costs in the first nine months of fiscal 2017 increased 13.1% and is expected to further rise in the to-be-reported quarter. This in turn is likely to affect margins and earnings.
Subsequently, the consensus estimate for earnings in the fourth quarter is pegged at 61 cents, reflecting a 3.2% year-over-year decline.
Our Quantitative Model Does Not Predict a Beat
Dave & Buster’s does not have the right combination of two main ingredients — a positive Earnings ESP and a Zacks Rank #3 (Hold) or higher — for increasing the odds of an earnings beat.
Zacks ESP: The company has an Earnings ESP of +1.38%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: However, the restaurant has a Zacks Rank #4 (Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Dave & Buster's Entertainment, Inc. Price and EPS Surprise
Dave & Buster's Entertainment, Inc. Price and EPS Surprise | Dave & Buster's Entertainment, Inc. Quote
As it is, we caution against stocks with a Zacks Rank #4 or 5 (Sell-rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Peer Releases
Chipotle Mexican Grill (CMG - Free Report) posted mixed fourth-quarter 2017 results, with adjusted earnings of $1.34 per share, surpassing the consensus estimate of $1.32 by 1.5%. Earnings also grew 143.6% year over year on lower costs and higher revenues.
McDonald's (MCD - Free Report) reported fourth-quarter 2017 adjusted earnings per share (EPS) of $1.71, beating the consensus mark of $1.59 by 7.5%. Earnings improved 19% from the year-ago quarter (16% in constant currency). The upside reflects strong operating performance and G&A savings.
Domino’s (DPZ - Free Report) fourth-quarter 2017 earnings matched the Zacks Consensus Estimate while revenues missed the same. Adjusted earnings came in at $1.94 per share and improved 31.1% from the year-ago quarter on higher net income and lower share count, as a result of share repurchases.
Can Hackers Put Money INTO Your Portfolio?
Earlier this month, credit bureau Equifax announced a massive data breach affecting 2 out of every 3 Americans. The cybersecurity industry is expanding quickly in response to this and similar events. But some stocks are better investments than others.
Zacks has just released Cybersecurity! An Investor’s Guide to help Zacks.com readers make the most of the $170 billion per year investment opportunity created by hackers and other threats. It reveals 4 stocks worth looking into right away.
Download the new report now>>