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Dave & Buster's (PLAY) Up 21% in 6 Months: Will the Gain Last?
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Shares of Dave & Buster's Entertainment, Inc. (PLAY - Free Report) have gained 20.6% in the past six months against the industry’s decline of 2.3%. The company is benefiting from strategic initiatives, which include a new menu, optimized marketing and technology investments. Also, the emphasis on remodels with new entertainment options bodes well.
This Zacks Rank #3 (Hold) company’s earnings and sales in the current year are 2.2% and 13.6% year over year, respectively. However, high costs remain a concern for it.
Growth Catalysts
The company continues to focus on simplifying its store operations, improving the guest experience and enhancing its food and beverage and entertainment offerings to drive sales and profitability. It has also taken steps to widen its entertainment plans by operating programmed events in select markets. It stated plans to boost its entertainment offerings with the introduction of new games. Mobile web adoption has been solid, significantly exceeding the company’s expectations.
Meanwhile, the company continues to focus on virtual kitchen concepts, optimizing back-of-the-house operations and enhancing its bar menu to enable a seamless flow of food as well as boost guest experience. To this end, it has rolled out high-speed ovens and upgraded kitchen management systems to simplify operations. Moreover, the company increased its focus on the beverage menu.
Dave & Buster's continues to pursue a disciplined new store growth strategy in both new and existing markets, given the broad appeal of its brand. Management believes that it can grow the concept to more than 200 units in North America over time. In addition to the growth potential that exists in North America, management is optimistic regarding the brand’s significant appeal in certain international markets.
During the second quarter of fiscal 2023, the company opened two new Dave & Buster's stores in Lubbock, TX and Queen Creek, AZ and one new Main Event store in Greenville, SC. Subsequent to the quarter-end, it opened one new Dave & Buster's store in Des Moines, IA and one new Main Event store in Fayetteville, NC. Following the openings, it reported solid performances in regard to the same. In fiscal 2023, the company intends to open 16 new stores (including 11 Dave & Buster's and 5 Main Event locations) and relocate Dave & Buster's Vernon Hills store.
Dave & Buster's digital initiatives are likely to drive growth. The company believes that 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. Thus, it intends to leverage its growing loyalty database and continue to invest in other mobile applications to build customer connections and drive frequent customer visitation. Backed by solid customer acceptance, the company is testing a completely self-serve mobile web-enabled guest experience in two of its stores.
Image Source: Zacks Investment Research
Concerns
A challenging macro environment, including inflationary pressures on labor and commodities, continues to impact it negatively. It anticipates the headwinds to persist over the next few quarters. 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 second-quarter fiscal 2023, total operating expenses were $465 million, up from $411.9 million reported in the prior-year quarter.
Key Picks
Below, we have presented some better-ranked stocks from the Zacks Retail-Wholesale sector.
The Zacks Consensus Estimate for Wingstop’s 2024 sales and earnings per share (EPS) suggests rises of 15.6% and 17.2%, respectively, from the year-ago period’s levels.
Brinker International, Inc. (EAT - Free Report) currently sports a Zacks Rank #1. It has a trailing four-quarter earnings surprise of 223.6%, on average. Shares of EAT have increased 2.6% in the past year.
The Zacks Consensus Estimate for EAT’s fiscal 2024 sales and EPS indicates a 5% and a 26.2% rise, respectively, from the year-ago period’s levels.
FAT Brands Inc. (FAT - Free Report) currently carries a Zacks Rank #2 (Buy). It has a trailing four-quarter earnings surprise of 36.6%, on average. The stock has declined 14.5% in the past year.
The Zacks Consensus Estimate for FAT Brands’ 2024 sales and EPS suggests an increase of 35.6% and 27.4%, respectively, from the year-ago period’s levels.
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Dave & Buster's (PLAY) Up 21% in 6 Months: Will the Gain Last?
Shares of Dave & Buster's Entertainment, Inc. (PLAY - Free Report) have gained 20.6% in the past six months against the industry’s decline of 2.3%. The company is benefiting from strategic initiatives, which include a new menu, optimized marketing and technology investments. Also, the emphasis on remodels with new entertainment options bodes well.
This Zacks Rank #3 (Hold) company’s earnings and sales in the current year are 2.2% and 13.6% year over year, respectively. However, high costs remain a concern for it.
Growth Catalysts
The company continues to focus on simplifying its store operations, improving the guest experience and enhancing its food and beverage and entertainment offerings to drive sales and profitability. It has also taken steps to widen its entertainment plans by operating programmed events in select markets. It stated plans to boost its entertainment offerings with the introduction of new games. Mobile web adoption has been solid, significantly exceeding the company’s expectations.
Meanwhile, the company continues to focus on virtual kitchen concepts, optimizing back-of-the-house operations and enhancing its bar menu to enable a seamless flow of food as well as boost guest experience. To this end, it has rolled out high-speed ovens and upgraded kitchen management systems to simplify operations. Moreover, the company increased its focus on the beverage menu.
Dave & Buster's continues to pursue a disciplined new store growth strategy in both new and existing markets, given the broad appeal of its brand. Management believes that it can grow the concept to more than 200 units in North America over time. In addition to the growth potential that exists in North America, management is optimistic regarding the brand’s significant appeal in certain international markets.
During the second quarter of fiscal 2023, the company opened two new Dave & Buster's stores in Lubbock, TX and Queen Creek, AZ and one new Main Event store in Greenville, SC. Subsequent to the quarter-end, it opened one new Dave & Buster's store in Des Moines, IA and one new Main Event store in Fayetteville, NC. Following the openings, it reported solid performances in regard to the same. In fiscal 2023, the company intends to open 16 new stores (including 11 Dave & Buster's and 5 Main Event locations) and relocate Dave & Buster's Vernon Hills store.
Dave & Buster's digital initiatives are likely to drive growth. The company believes that 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. Thus, it intends to leverage its growing loyalty database and continue to invest in other mobile applications to build customer connections and drive frequent customer visitation. Backed by solid customer acceptance, the company is testing a completely self-serve mobile web-enabled guest experience in two of its stores.
Image Source: Zacks Investment Research
Concerns
A challenging macro environment, including inflationary pressures on labor and commodities, continues to impact it negatively. It anticipates the headwinds to persist over the next few quarters. 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 second-quarter fiscal 2023, total operating expenses were $465 million, up from $411.9 million reported in the prior-year quarter.
Key Picks
Below, we have presented some better-ranked stocks from the Zacks Retail-Wholesale sector.
Wingstop Inc. (WING - Free Report) currently sports a Zacks Rank #1 (Strong Buy). It has a trailing four-quarter earnings surprise of 28.9%, on average. The stock has gained 51.1% in the past year. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Wingstop’s 2024 sales and earnings per share (EPS) suggests rises of 15.6% and 17.2%, respectively, from the year-ago period’s levels.
Brinker International, Inc. (EAT - Free Report) currently sports a Zacks Rank #1. It has a trailing four-quarter earnings surprise of 223.6%, on average. Shares of EAT have increased 2.6% in the past year.
The Zacks Consensus Estimate for EAT’s fiscal 2024 sales and EPS indicates a 5% and a 26.2% rise, respectively, from the year-ago period’s levels.
FAT Brands Inc. (FAT - Free Report) currently carries a Zacks Rank #2 (Buy). It has a trailing four-quarter earnings surprise of 36.6%, on average. The stock has declined 14.5% in the past year.
The Zacks Consensus Estimate for FAT Brands’ 2024 sales and EPS suggests an increase of 35.6% and 27.4%, respectively, from the year-ago period’s levels.