Dave & Buster's Entertainment, Inc. (PLAY - Free Report) is poised to benefit from unique business model, various sales boosting initiatives and continual expansion plans. However, decline in traffic due to coronavirus-related woes is a concern.
Let us delve into factors that suggest that investors should hold on to the stock for the time being.
In a bid to recover its business, post the coronavirus-induced shutdowns, Dave & Buster's is focused on reopening stores in compliance with the state and local regulators. Given the size of its stores, the company is well placed to generate significant revenues despite capacity limitations and social distancing protocols.
Considering the broad appeal of its brand, the company continues to pursue a disciplined new store growth strategy in both new and existing markets. Management believes that it can extend the concept to more than 200 units in North America over time.
The company believes that it can drive traffic by enhancing in-store and out-of-store customer experience via digital and mobile initiatives as well as through employing better technology. Notably, the company intends to strengthen its growing loyalty database by investing in other mobile applications for building customer connections and driving frequent customer visitation.
Dave & Buster's continues to perform well on the back of the unique customizable experience that it offers across its four platforms, “Eat, Drink, Play and Watch.” Apart from great food or beverages, the company’s entertainment business has been driving growth. Furthermore, the company continues to evolve its amusement business on the back of new and riveting content — including games based on some of the world’s finest movie properties. Notably, amusement and other revenues contributed 60% to total revenues in first-quarter fiscal 2020.
Dave & Buster's is facing declining traffic due to coronavirus-induced shutdowns. Although the company has reopened majority of its restaurants, it is likely to witness dismal traffic due to social distancing protocols. Owing to the uncertainty of the crisis, the company has also suspended its dividend payout and share buyback programs.
The company, which share space with Yum! Brands (YUM - Free Report) , McDonald’s (MCD - Free Report) and Domino’s (DPZ - Free Report) , is experiencing increased competitive pressure as numerous restaurant operators are adopting advanced and prudent strategies to boost sales. Notably, the company’s shares have declined 63.5% so far this year against the industry’s 7.8% decline.
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.
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