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Dave & Buster's (PLAY) Shares Down Despite Q4 Earnings Beat

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Dave & Buster's Entertainment, Inc. (PLAY - Free Report) posted decent results in the fourth quarter of fiscal 2017, wherein earnings surpassed the Zacks Consensus Estimate while revenues met the same. However, the company’s shares have lost more than 6% in after-hours trading on Apr 3, post the earnings release.

Although earnings surpassed the consensus estimate, weak comps and dented margins might have hurt investors’ sentiments.

Adjusted earnings of 61 cents surpassed the consensus estimate of 59 cents by 3.4%. Earnings, however, declined 3.2% year over year. Decrease in margin due to high operating costs might have led earnings to fall. Also, weak comps might have had affected the bottom line.

Dave & Buster's Entertainment, Inc. Price, Consensus and EPS Surprise

 

 

Notably, the company’s shares have also lost 32.4% in the past year against its industry’s gain of 10.7%.

Let’s delve deeper into the numbers.




Detailed Revenue Discussion

Quarterly revenues of $304.9 million were almost in line with the consensus estimate. Revenues increased 12.9% from the prior-year quarter, favored by the additional week in fiscal 2017 compared with fiscal 2016. The additional week increased total revenues by $19.7 million.

Overall comps declined 5.9% in the fiscal fourth quarter of 2017, comparing unfavorably with a 3.2% increase in the year-ago quarter. The decline in comps was due to a 6.4% dip in walk-in sales and 2.9% decrease in special events sales.

Non-comparable store revenues in the quarter increased 67.5% from the year-ago quarter to $73.6 million.

Food and Beverage revenues (45.5% of total revenues in fiscal fourth quarter of 2017) increased 10% year over year to $138.6 million, whereas Amusement and Other revenues (54.5%) increased 15.3% to $166.3 million.

However, comps for Food and Beverage declined 7.8% in the quarter. Also, Amusement and Other witnessed a comps fall of 4.2%.

Operating Highlights

Fiscal fourth quarter operating margin declined roughly 260 basis points (bps) year over year.

Net income in the quarter totaled $35.6 million, up from $27.4 million in the prior-year quarter. Net income was driven by the additional week and tax benefits.

Adjusted EBITDA increased 10.7% to $82.5 million in the fourth quarter of fiscal 2017 from $74.5 million in the same period last year. The additional week increased adjusted EBITDA by $4.3 million.

EBITDA margin however decreased approximately 60 bps year over year.

Balance Sheet

As of Feb 4, 2018, cash and cash equivalents were $18.8 million compared with $20.1 million as of Jan 29, 2017.

Long-term debt totaled $351.2 million at the end of fiscal 2017, up from $256.6 million at the end of fiscal 2016.

During fiscal year 2017, the company repurchased roughly 2.6 million shares of its common stock for $151.9 million.

Cumulatively, as of Mar 28, 2018, management repurchased approximately 3.7 million shares for $202.8 million. As of the same date, Dave & Buster’s had $97.2 million remaining under its current share repurchase authorization.

Key Highlights of Fiscal 2017 Results

Total revenues in fiscal 2017 came in at $1.1 billion, which is within the earlier anticipated range. Revenues increased 13.4% from the year-ago quarter. Comps in the fiscal year declined 0.9%.

Adjusted earnings of $2.60 per share increased 23.8% from the prior-year quarter. Adjusted EBITDA increased 15.8% to $302.7 million from $261.5 million in fiscal 2016.

Store Development

Dave & Buster’s opened five stores during the fiscal fourth quarter in Brandon (Tampa), Florida; Woodbridge, New Jersey; Auburn, Washington; White Marsh (Baltimore), Maryland; and Bayamon, Puerto Rico, totaling 14 stores for the fiscal year.

Total capital additions (net of tenant improvement allowances) during fiscal year 2017 were $183.0 million.

Fiscal 2018 Outlook

The company expects revenues in the range of $1.20-$1.24 billion. Comps are anticipated to decline in the low-to-mid single digits.

The company expects to open 14 to 15 new stores.

Zacks Rank & Peer Releases

Dave & Buster’s carries a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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 2017adjusted 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 2017earnings 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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