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Why Is Dave & Buster's (PLAY) Down 0.9% Since Last Earnings Report?

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It has been about a month since the last earnings report for Dave & Buster's (PLAY - Free Report) . Shares have lost about 0.9% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Dave & Buster's due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Dave & Buster's Q1 Earnings & Revenues Miss Estimates

Dave & Buster’s reported lower-than-expected results for the first quarter of fiscal 2019. Earnings and revenues missed the Zacks Consensus Estimate, after delivering a beat in the trailing four quarters. Also, comparable store sales (comps) came in below expectations. Furthermore, Dave & Buster's lowered its guidance for the fiscal year.

Adjusted earnings came in at $1.13 per share, which missed the Zacks Consensus Estimate by a penny but increased 8.7% year over year. Results were aided by solid segmental revenues and consistent unit growth. The company’s increased focus on generating value, better weather conditions and improvement in offerings too favored Dave & Buster's in the quarter under review.

Detailed Revenue Discussion

Quarterly revenues of $363.6 million lagged the consensus mark of $371 million. However, the top line rose 9.5% from the prior-year quarter number. The upside was primarily driven by consistent unit growth and robust Amusements and Other revenues as well as Food and Beverage revenues.

Food and Beverage revenues (40.8% of total revenues in the fiscal first quarter) increased 6.1% year over year to $148.2 million while Amusement and Other revenues (59.2%) rose 11.9% to $215.4 million.

Meanwhile, overall comps decreased 0.3% in the fiscal first quarter, comparing favorably with a 4.9% decline in the year-ago quarter. This downturn can be attributed to a 0.6% decline in walk-in sales, which overshadowed 3% increase in special events sales. While comps at Amusements & Other increased 1.8%, the same declined 3.3% at Food & Beverage.

Non-comparable store revenues in the reported quarter increased 76.8% from the year-ago quarter to $75 million.

Operating Highlights

In the fiscal first quarter, operating margin declined roughly 170 basis points (bps) year over year to 15.9%.

Net income totaled $42.4 million, down from $42.2 million in the prior-year quarter. Adjusted EBITDA increased 2.4% to $98.2 million compared with $95.9 million in the same period last year. Also, the EBITDA margin contracted 190 bps year over year to 27%.

Balance Sheet

As of May 5, 2019, cash and cash equivalents were $20.4 million compared with $21.6 million as of Feb 3, 2019.

Long-term debt totaled $427.8 million at the end of the reported quarter, up from $378.5 million at the end of Feb 3, 2019.

During the fiscal first quarter, the company repurchased roughly 1.3 million shares for $63.5 million. As of the same date, cumulatively, management repurchased 7.6 million shares for $393.3 million.

On Apr 2, 2019, the company’s board of directors authorized the repurchase of an additional $200-million stock under the existing share repurchase program through the end of fiscal 2020.

Furthermore, management paid a quarterly cash dividend of 15 cents per share in the quarter under review.

Store Development

Dave & Buster’s launched seven stores during the fiscal first quarter in Louisville, KY; North Hills (Pittsburgh), PA; Thousand Oaks, CA; Daytona Beach, FL; Fairfax, VA; Ft. Myers, FL; and Sevierville, TN. In fiscal 2019, management expects to open 15-16 stores in new locations, with 12% unit growth.

Fiscal 2019 Outlook

Dave & Buster’s trimmed its fiscal 2019 guidance. The company expects total revenues of $1.365-$1.390 billion compared with earlier guided range of $1.370-$1.400 billion. Comps are anticipated to be -1.5% to +0.5% compared with prior guided range of flat to up 1.5%. Adjusted EBITDA is expected to be $283-$295 million, down from $285-$300 million anticipated earlier.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates flatlined during the past month.

VGM Scores

At this time, Dave & Buster's has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with a D. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Dave & Buster's has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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