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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 digital initiatives, robust comps growth and entertainment offerings. These along with its focus on store expansions bode well. However, inflationary pressures are a concern.
Let us discuss the factors highlighting why investors should retain the stock for the time being.
Growth Catalysts
Dave & Buster's digital initiatives are likely to drive growth. The company believes it can drive traffic by enhancing in-store and out-of-store customer experience via digital and mobile strategic initiatives and deploying better technology. During the fiscal fourth quarter of 2022, the company made improvements in its website, featuring special event capabilities, e-commerce and programming content. Also, it emphasized on its data and digital innovation capabilities to drive relevancy, media efficiency and tech-enabled hospitality. The company intends to leverage its growing loyalty database and invest in other mobile applications to build customer connections and drive frequent customer visitation.
Robust comps growth bodes well for the company. During the fiscal fourth quarter, pro forma comparable store sales (including Main Event branded stores) increased 19% year over year and 14.1% from 2019 levels. During the quarter, pro forma combined walk-in comparable store sales increased 12.1% year over year.
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 a 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. The company emphasizes on following a test-and-learn model to drive growth in the upcoming periods.
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. In September 2022, the company signed an international franchise partnership to expand Dave & Buster's brand to locations in the Kingdom of Saudi Arabia, the United Arab Emirates and Egypt. In fiscal 2022, the company opened seven new Dave & Buster’s locations and one new Main Event location. Quarter to date (first quarter fiscal 2023), the company opened a Dave & Buster’s location in San Juan, Puerto Rico and two additional Main Event locations in Little Rock, AR and Tucson, AZ. Also, it stated the opening of one Main Event location (in Lexington, KY) is in the pipeline. 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.
Concerns
Image Source: Zacks Investment Research
In the past three months, shares of Dave & Buster's have declined 14.2% against the industry’s 6.7% growth. The downside was mainly due to a challenging macro environment, including inflationary pressures on labor and commodities.
In fiscal 2022, the costs of food and beverage products (as a percentage of food and beverage revenues) increased 130 basis points year over year to 28.6%. The increase was driven by unfavorable impacts of commodity cost increases in meat and dairy products, partially mitigated by food price increases. At the end of fourth-quarter fiscal 2022, total operating expenses were $486.5 million, up from $296.6 million reported in the prior-year quarter. The company anticipates inflationary pressures to impact operations for some time.
Chuy’s Holdings currently sports a Zacks Rank #1. CHUY has a trailing four-quarter earnings surprise of 19.1%, on average. Shares of CHUY have increased 35.4% in the past year.
The Zacks Consensus Estimate for Chuy’s Holdings 2023 sales and EPS suggests growth of 10.8% and 19%, respectively, from the corresponding year-ago period’s levels.
Arcos Dorados currently sports a Zacks Rank #1. ARCO has a long-term earnings growth of 7.8%. Shares of the company have increased 1.6% in the past year.
The Zacks Consensus Estimate for Arcos Dorados’ 2024 sales and EPS suggests growth of 8% and 11.4%, respectively, from the year-ago period’s levels.
Bloomin' Brands currently sports a Zacks Rank #1. BLMN has a long-term earnings growth rate of 12.3%. The stock has gained 13.3% in the past year.
The Zacks Consensus Estimate for Bloomin' Brands’ 2024 sales and EPS suggests growth of 2.4% and 5.5%, respectively, from the year-ago period’s reported levels.
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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 digital initiatives, robust comps growth and entertainment offerings. These along with its focus on store expansions bode well. However, inflationary pressures are a concern.
Let us discuss the factors highlighting why investors should retain the stock for the time being.
Growth Catalysts
Dave & Buster's digital initiatives are likely to drive growth. The company believes it can drive traffic by enhancing in-store and out-of-store customer experience via digital and mobile strategic initiatives and deploying better technology. During the fiscal fourth quarter of 2022, the company made improvements in its website, featuring special event capabilities, e-commerce and programming content. Also, it emphasized on its data and digital innovation capabilities to drive relevancy, media efficiency and tech-enabled hospitality. The company intends to leverage its growing loyalty database and invest in other mobile applications to build customer connections and drive frequent customer visitation.
Robust comps growth bodes well for the company. During the fiscal fourth quarter, pro forma comparable store sales (including Main Event branded stores) increased 19% year over year and 14.1% from 2019 levels. During the quarter, pro forma combined walk-in comparable store sales increased 12.1% year over year.
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 a 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. The company emphasizes on following a test-and-learn model to drive growth in the upcoming periods.
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. In September 2022, the company signed an international franchise partnership to expand Dave & Buster's brand to locations in the Kingdom of Saudi Arabia, the United Arab Emirates and Egypt. In fiscal 2022, the company opened seven new Dave & Buster’s locations and one new Main Event location. Quarter to date (first quarter fiscal 2023), the company opened a Dave & Buster’s location in San Juan, Puerto Rico and two additional Main Event locations in Little Rock, AR and Tucson, AZ. Also, it stated the opening of one Main Event location (in Lexington, KY) is in the pipeline. 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.
Concerns
Image Source: Zacks Investment Research
In the past three months, shares of Dave & Buster's have declined 14.2% against the industry’s 6.7% growth. The downside was mainly due to a challenging macro environment, including inflationary pressures on labor and commodities.
In fiscal 2022, the costs of food and beverage products (as a percentage of food and beverage revenues) increased 130 basis points year over year to 28.6%. The increase was driven by unfavorable impacts of commodity cost increases in meat and dairy products, partially mitigated by food price increases. At the end of fourth-quarter fiscal 2022, total operating expenses were $486.5 million, up from $296.6 million reported in the prior-year quarter. The company anticipates inflationary pressures to impact operations for some 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 Chuy's Holdings, Inc. (CHUY - Free Report) , Arcos Dorados Holdings Inc. (ARCO - Free Report) and Bloomin' Brands, Inc. (BLMN - Free Report) .
Chuy’s Holdings currently sports a Zacks Rank #1. CHUY has a trailing four-quarter earnings surprise of 19.1%, on average. Shares of CHUY have increased 35.4% in the past year.
The Zacks Consensus Estimate for Chuy’s Holdings 2023 sales and EPS suggests growth of 10.8% and 19%, respectively, from the corresponding year-ago period’s levels.
Arcos Dorados currently sports a Zacks Rank #1. ARCO has a long-term earnings growth of 7.8%. Shares of the company have increased 1.6% in the past year.
The Zacks Consensus Estimate for Arcos Dorados’ 2024 sales and EPS suggests growth of 8% and 11.4%, respectively, from the year-ago period’s levels.
Bloomin' Brands currently sports a Zacks Rank #1. BLMN has a long-term earnings growth rate of 12.3%. The stock has gained 13.3% in the past year.
The Zacks Consensus Estimate for Bloomin' Brands’ 2024 sales and EPS suggests growth of 2.4% and 5.5%, respectively, from the year-ago period’s reported levels.