Why have Dave & Buster’s (PLAY) shares fallen 12.6% since their last earnings report?

It’s been about a month since Dave & Buster’s (PLAY) last reported earnings. The stock is down about 12.6% in that time, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or does Dave & Buster’s have a breakout opportunity? Before we dive into how investors and analysts have reacted recently, let’s take a quick look at the most recent earnings report to better understand the important factors.

Dave & Buster’s Q1 earnings miss estimates

Dave & Buster reported lukewarm results for the first quarter of fiscal 2024, with both earnings and revenue missing the Zacks Consensus Estimate, with both metrics declining year-over-year.

The company reported more difficult year-over-year comparisons in January and February, exacerbated by challenging weather conditions. Sales during the period remained uneven due to economic headwinds in lower-income demographics. A shortened and condensed spring break period further impacted results, limiting the usual extended period of activity.

Despite seeing some improvements in traffic, PLAY posted a negative single-digit trend in comparable sales. The company remains cautious given the challenging macroeconomic environment.

Profits and revenues in detail

For the fiscal fourth quarter, the company reported adjusted earnings per share (EPS) of $1.12, missing the Zacks Consensus Estimate of $1.56. In the same quarter a year earlier, the company reported adjusted earnings per share (EPS) of $1.52.

Quarterly revenue of $588.1 million missed the consensus of $611 million. The top line was down 1.5% from $597.3 million reported in the prior-year quarter.

Food and beverage revenue (34.4% of total revenue in the reported quarter) decreased 0.9% year over year to $202.4 million. Entertainment revenue (65.6%) decreased 1.9% year over year to $385.7 million.

Comps Details

In the quarter under review, comparable store sales (including Main Event brand stores) decreased by 5.6% year-on-year.

Operational Highlights

Operating income for the quarter was $85.5 million, compared to $121.4 million in the prior-year quarter. Operating margin was 14.5%, compared to 20.2% in the prior-year quarter.

Adjusted EBITDA was $159.1 million compared to $182.1 million in the prior-year quarter. The decrease was primarily due to labor and marketing expenses related to the introduction of a new menu and service model, the implementation of several new technology systems and an unsuccessful marketing campaign test.

The story continues

Balance

Cash and cash equivalents as of May 5, 2024 amounted to $32.1 million compared to $37.3 million as of February 4, 2024.

Year to date (as of May 5, 2024), the company has repurchased 1 million shares at a total cost of $50 million. As of May 5, the company had $150 million available for the repurchase program.

At the end of the first fiscal quarter, total net long-term debt was approximately $1.29 billion, compared with $1.28 billion in the prior-year quarter.

How have estimates changed since then?

Over the past month, investors have witnessed a downward trend in estimate revisions.

The consensus estimate has been revised by -12.03% due to these changes.

VGM Results

Dave & Buster’s currently has a weak Growth Score of D, though its Momentum Score is slightly lower at F. However, the stock has an A rating for Value, putting it in the top 20% for this investment strategy.

Overall, the stock has a Composite VGM Score of C. If you’re not focused on a single strategy, this rating should interest you.

Perspectives

Stock estimates are generally trending lower, and the magnitude of these revisions indicates a downward shift. It is no surprise that Dave & Buster’s has a Zacks Rank #5 (Strong Sell). We expect a lower than average return on the stock over the next few months.

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