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Dave & Buster's (PLAY) Down 34% in Past 3 Months: Here's Why
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Dave & Buster's Entertainment, Inc. (PLAY - Free Report) shares have plunged 33.6% in the past three months compared with the Zacks Retail - Restaurants industry’s 4.5% decline.
This American restaurant and entertainment business company’s prospects are largely hindered by declining comps, increased cost structure and less international exposure. Also, the ongoing macroeconomic uncertainties and inflationary market scenario are causing the consumers to be hesitant about their discretionary spending.
The Zacks Consensus Estimate of this Zacks Rank #5 (Strong Sell) company for fiscal 2024 earnings has declined to $3.15 per share from $3.56 in the past seven days. Also, the consensus estimate for the second quarter has decreased to $1 per share from $1.09 in the same period.
PLAY’s earnings estimates missed the consensus mark on two of the trailing four quarters, met on one occasion and beat on the remaining occasion, the average earnings surprise being 18.2%. The uncertainty in the trend signifies analysts’ concerns about the stock’s growth potential in the near term.
Image Source: Zacks Investment Research
Let’s delve deeper into the factors that are hindering the prospects of PLAY.
Factors Marring Growth Prospects
Tepid Q1 Results: Dave & Buster’s’ first-quarter fiscal 2024 earnings and total revenues missed the Zacks Consensus Estimate by 28.2% and 3.8%, respectively. Also, the top and bottom lines declined on a year-over-year basis by 1.5% and 26.3%, respectively. The quarter’s downtrend was driven by challenging weather conditions and economic difficulties in the lower-income demographics. Also, the condensed and shorter spring break period affected the results further. The ongoing macroeconomic risks are making consumers cautious about discretionary spending. Increased operating costs are ailing the bottom line, given the low top-line growth trend.
Declining Comps: Comparable store sales determine a huge part of Dave & Buster’s revenue trend. A decline in this metric can majorly hurt the revenue growth of the company. During the fiscal first quarter, pro-forma comparable store sales (including Main Event branded stores) declined 5.6% year over year. The downside was caused by a drop in walk-in transaction counts against a stronger consumer environment in the prior year. The weather conditions in January and February negatively impacted the comps of the company, thus driving the downtrend to a great extent.
Increased Costs & Expenses: The company has been witnessing high costs and expenses for some time due to the challenging macro environment, including inflationary pressures on labor and commodities. Moreover, the bottom line of Dave & Buster’s, during the fiscal first quarter, was compromised mainly due to the realization of more than $10 million of incremental labor and marketing costs associated with the rollout of new initiatives and certain marketing tests. The company aims not to repeat the realization of these costs going forward, as it hugely impacted the bottom line during the quarter.
Also, rising store operating expenses, and operating payroll and benefits added to the increase of total operating costs of PLAY during the fiscal first quarter. The total operating costs – as a percentage of total revenues – increased to 85.5% from 79.8% reported in the comparable period a year ago.
Key Picks
Here are some better-ranked stocks from the Zacks Retail-Wholesale sector.
WING has a trailing four-quarter earnings surprise of 21.4%, on average. The stock has risen 123.7% in the past year. The Zacks Consensus Estimate for WING’s 2024 sales and earnings per share (EPS) indicates growth of 27.5% and 37.1%, respectively, from the year-ago period’s levels.
Sprouts Farmers Market, Inc. (SFM - Free Report) currently sports a Zacks Rank of 1. SFM has a trailing four-quarter earnings surprise of 9.2%, on average. The stock has risen 134.3% in the past year.
The consensus estimate for SFM’s 2024 sales and EPS indicates growth of 8% and 9.9%, respectively, from the year-ago period’s levels.
The Gap, Inc. (GPS - Free Report) currently sports a Zacks Rank of 1. GPS has a trailing four-quarter earnings surprise of 202.7%, on average. The stock has surged 182% in the past year.
The Zacks Consensus Estimate for GPS’ fiscal 2024 sales and EPS indicates a rise of 0.2% and 21.7%, respectively, from the year-ago period’s levels.
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Dave & Buster's (PLAY) Down 34% in Past 3 Months: Here's Why
Dave & Buster's Entertainment, Inc. (PLAY - Free Report) shares have plunged 33.6% in the past three months compared with the Zacks Retail - Restaurants industry’s 4.5% decline.
This American restaurant and entertainment business company’s prospects are largely hindered by declining comps, increased cost structure and less international exposure. Also, the ongoing macroeconomic uncertainties and inflationary market scenario are causing the consumers to be hesitant about their discretionary spending.
The Zacks Consensus Estimate of this Zacks Rank #5 (Strong Sell) company for fiscal 2024 earnings has declined to $3.15 per share from $3.56 in the past seven days. Also, the consensus estimate for the second quarter has decreased to $1 per share from $1.09 in the same period.
PLAY’s earnings estimates missed the consensus mark on two of the trailing four quarters, met on one occasion and beat on the remaining occasion, the average earnings surprise being 18.2%. The uncertainty in the trend signifies analysts’ concerns about the stock’s growth potential in the near term.
Image Source: Zacks Investment Research
Let’s delve deeper into the factors that are hindering the prospects of PLAY.
Factors Marring Growth Prospects
Tepid Q1 Results: Dave & Buster’s’ first-quarter fiscal 2024 earnings and total revenues missed the Zacks Consensus Estimate by 28.2% and 3.8%, respectively. Also, the top and bottom lines declined on a year-over-year basis by 1.5% and 26.3%, respectively. The quarter’s downtrend was driven by challenging weather conditions and economic difficulties in the lower-income demographics. Also, the condensed and shorter spring break period affected the results further. The ongoing macroeconomic risks are making consumers cautious about discretionary spending. Increased operating costs are ailing the bottom line, given the low top-line growth trend.
Declining Comps: Comparable store sales determine a huge part of Dave & Buster’s revenue trend. A decline in this metric can majorly hurt the revenue growth of the company. During the fiscal first quarter, pro-forma comparable store sales (including Main Event branded stores) declined 5.6% year over year. The downside was caused by a drop in walk-in transaction counts against a stronger consumer environment in the prior year. The weather conditions in January and February negatively impacted the comps of the company, thus driving the downtrend to a great extent.
Increased Costs & Expenses: The company has been witnessing high costs and expenses for some time due to the challenging macro environment, including inflationary pressures on labor and commodities. Moreover, the bottom line of Dave & Buster’s, during the fiscal first quarter, was compromised mainly due to the realization of more than $10 million of incremental labor and marketing costs associated with the rollout of new initiatives and certain marketing tests. The company aims not to repeat the realization of these costs going forward, as it hugely impacted the bottom line during the quarter.
Also, rising store operating expenses, and operating payroll and benefits added to the increase of total operating costs of PLAY during the fiscal first quarter. The total operating costs – as a percentage of total revenues – increased to 85.5% from 79.8% reported in the comparable period a year ago.
Key Picks
Here are some better-ranked stocks from the Zacks Retail-Wholesale sector.
Wingstop Inc. (WING - Free Report) currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks Rank #1 stocks here.
WING has a trailing four-quarter earnings surprise of 21.4%, on average. The stock has risen 123.7% in the past year. The Zacks Consensus Estimate for WING’s 2024 sales and earnings per share (EPS) indicates growth of 27.5% and 37.1%, respectively, from the year-ago period’s levels.
Sprouts Farmers Market, Inc. (SFM - Free Report) currently sports a Zacks Rank of 1. SFM has a trailing four-quarter earnings surprise of 9.2%, on average. The stock has risen 134.3% in the past year.
The consensus estimate for SFM’s 2024 sales and EPS indicates growth of 8% and 9.9%, respectively, from the year-ago period’s levels.
The Gap, Inc. (GPS - Free Report) currently sports a Zacks Rank of 1. GPS has a trailing four-quarter earnings surprise of 202.7%, on average. The stock has surged 182% in the past year.
The Zacks Consensus Estimate for GPS’ fiscal 2024 sales and EPS indicates a rise of 0.2% and 21.7%, respectively, from the year-ago period’s levels.