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Here's Why Investors Should Retain Dave & Buster's (PLAY) Stock
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Dave & Buster's Entertainment, Inc. (PLAY - Free Report) is poised to benefit from its amusement business, digital efforts and expansion of entertainment options. This and focus on traffic-driving initiatives bode well. However, higher expenses and a soft Special Events business are a headwind.
Let us discuss the factors highlighting why investors should retain the stock for the time being.
Growth Catalysts
Dave & Buster's has been gaining from a higher mix of amusements and a leaner operating model. During the fiscal first quarter, the company benefitted from the launch of its Late Night Happy Hour initiative - including a series of D&B Night with custom content and daily takeovers (featuring club mixes). Positive customer feedback was witnessed as walk-in comp sales (in the late night segment) increased quarter over quarter and 9% from 2019 levels. Also, the company stated benefits from the rollout of eat and play combo, thereby leading to sequential comps improvement in both food and beverage. The company anticipates capitalizing on the pent-up demand by focusing on marketing and programming efforts through digital channels. Also, it emphasized on the rollout of the summer games program to drive visitation to its stores.
Dave & Buster's intends to broaden its entertainment offerings by including more immersive sports viewing experiences, adding fantasy sports and permitting in-sports betting options. The company plans to explore sports betting partnership to bring sports racing and daily fantasy sports to Dave & Buster's stores, subject to regulatory permissions. It is also working on an entertainment programming function focused on creating compelling content-based events to drive reach and boost visit frequency. Thus, with the help of a centralized programming team, Dave & Buster's intends to enhance the live sports experience in lieu of becoming a premier sports-watching destination. The company also stated that it intends to give its stores a fresh look to drive organic growth.
In the first quarter of fiscal 2022, the company initiated a partnership with UFC and WWE to unveil their pay-per-view events to the D&B locations across North America. The association with WWE enables the company to launch SummerSlam in July 2022. Also, the company emphasized on the addition of Main Event to the Dave & Buster’s team. The company anticipates achieving nearly $20 million in synergies within the first two years, backed by store support center alliance and supply-chain competency. It expects the acquisition to be accretive both from an earnings and growth perspective.
The company believes it can drive traffic by enhancing in-store and out-of-store customer experience via digital and mobile strategic initiatives and the deployment of better technology. During the first quarter of fiscal 2022, the company reported progress with respect to developing its new website. Scheduled to launch during third-quarter fiscal 2022, the application will likely feature special event capabilities, e-commerce and programming content. The company intends to leverage its growing loyalty database and continue to invest in other mobile applications to build customer connections and drive frequent customer visitation.
Image Source: Zacks Investment Research
So far this year, shares of Dave & Buster's have declined 16.2% compared with the industry’s 18.2% fall.
Concerns
The company has been continuously shouldering increased expenses, which have been detrimental to margins. The rise in labor and commodity cost continues to hurt the company. The industry players expect to witness higher costs due to labor and supply chain shortages for quite some time. The company has been witnessing labor challenges in a handful of markets. At the end of first-quarter fiscal 2022, total operating expenses were $352.4 million, up from $228.3 million reported in the prior-year quarter.
During the fiscal first quarter, the company reported softness in the Special Events business. Despite of sequential improvements during the quarter, the Special Events business were down 34.6% from 2019 levels. The company stated that Special Event comparable-store sales (during the first five weeks of second-quarter fiscal 2022) slumped 27.9% from 2019 levels. The company anticipates pandemic-related disruptions to continue for an extended period of time.
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Here's Why Investors Should Retain Dave & Buster's (PLAY) Stock
Dave & Buster's Entertainment, Inc. (PLAY - Free Report) is poised to benefit from its amusement business, digital efforts and expansion of entertainment options. This and focus on traffic-driving initiatives bode well. However, higher expenses and a soft Special Events business are a headwind.
Let us discuss the factors highlighting why investors should retain the stock for the time being.
Growth Catalysts
Dave & Buster's has been gaining from a higher mix of amusements and a leaner operating model. During the fiscal first quarter, the company benefitted from the launch of its Late Night Happy Hour initiative - including a series of D&B Night with custom content and daily takeovers (featuring club mixes). Positive customer feedback was witnessed as walk-in comp sales (in the late night segment) increased quarter over quarter and 9% from 2019 levels. Also, the company stated benefits from the rollout of eat and play combo, thereby leading to sequential comps improvement in both food and beverage. The company anticipates capitalizing on the pent-up demand by focusing on marketing and programming efforts through digital channels. Also, it emphasized on the rollout of the summer games program to drive visitation to its stores.
Dave & Buster's intends to broaden its entertainment offerings by including more immersive sports viewing experiences, adding fantasy sports and permitting in-sports betting options. The company plans to explore sports betting partnership to bring sports racing and daily fantasy sports to Dave & Buster's stores, subject to regulatory permissions. It is also working on an entertainment programming function focused on creating compelling content-based events to drive reach and boost visit frequency. Thus, with the help of a centralized programming team, Dave & Buster's intends to enhance the live sports experience in lieu of becoming a premier sports-watching destination. The company also stated that it intends to give its stores a fresh look to drive organic growth.
In the first quarter of fiscal 2022, the company initiated a partnership with UFC and WWE to unveil their pay-per-view events to the D&B locations across North America. The association with WWE enables the company to launch SummerSlam in July 2022. Also, the company emphasized on the addition of Main Event to the Dave & Buster’s team. The company anticipates achieving nearly $20 million in synergies within the first two years, backed by store support center alliance and supply-chain competency. It expects the acquisition to be accretive both from an earnings and growth perspective.
The company believes it can drive traffic by enhancing in-store and out-of-store customer experience via digital and mobile strategic initiatives and the deployment of better technology. During the first quarter of fiscal 2022, the company reported progress with respect to developing its new website. Scheduled to launch during third-quarter fiscal 2022, the application will likely feature special event capabilities, e-commerce and programming content. The company intends to leverage its growing loyalty database and continue to invest in other mobile applications to build customer connections and drive frequent customer visitation.
Image Source: Zacks Investment Research
So far this year, shares of Dave & Buster's have declined 16.2% compared with the industry’s 18.2% fall.
Concerns
The company has been continuously shouldering increased expenses, which have been detrimental to margins. The rise in labor and commodity cost continues to hurt the company. The industry players expect to witness higher costs due to labor and supply chain shortages for quite some time. The company has been witnessing labor challenges in a handful of markets. At the end of first-quarter fiscal 2022, total operating expenses were $352.4 million, up from $228.3 million reported in the prior-year quarter.
During the fiscal first quarter, the company reported softness in the Special Events business. Despite of sequential improvements during the quarter, the Special Events business were down 34.6% from 2019 levels. The company stated that Special Event comparable-store sales (during the first five weeks of second-quarter fiscal 2022) slumped 27.9% from 2019 levels. The company anticipates pandemic-related disruptions to continue for an extended period of time.
Zacks Rank & Key Picks
Dave & Buster's currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Some better-ranked stocks in the Zacks Retail-Wholesale sector are Dollar Tree Inc. (DLTR - Free Report) , BBQ Holdings, Inc. and Arcos Dorados Holdings Inc. (ARCO - Free Report) .
Dollar Tree sports a Zacks Rank #1. The company has a trailing four-quarter earnings surprise of 13.1%, on average. Shares of the company have gained 69.1% in the past year.
The Zacks Consensus Estimate for Dollar Tree’s 2022 sales and earnings per share (EPS) suggests growth of 6.7% and 40.5%, respectively, from the year-ago period’s levels.
BBQ Holdings carries a Zacks Rank #2 (Buy). BBQ Holdings has a long-term earnings growth of 14%. Shares of the company have decreased 30.4% in the past year.
The Zacks Consensus Estimate for BBQ Holdings’ 2022 sales and EPS suggests growth of 46.1% and 67.6%, respectively, from the year-ago period’s levels.
Arcos Dorados carries a Zacks Rank #2. Arcos Dorados has a long-term earnings growth of 34.4%. Shares of the company have risen 11.3% in the past year.
The Zacks Consensus Estimate for Arcos Dorados’ 2022 sales and EPS suggests growth of 16.6% and 83.3%, respectively, from the year-ago period’s levels.