Analysts’ revenue projections
Analysts project Dave & Buster’s Entertainment (PLAY) will deliver 12.9% YoY (year-over-year) growth in revenue to $305.1 million for fiscal 4Q17[1. Fiscal 4Q17 ended on February 4, 2018] driven by new store openings.
On January 8, 2018, the company mentioned that stores opened in 2016 had yielded cash on cash returns of approximately 54%. In fiscal 2017, Dave & Buster’s expects to open 14 new outlets. For fiscal 2018, Dave & Buster’s aims to open another 14 to 15 new stores.
However, in January 2018, the company slashed its outlook for fiscal 2017, which sent investors into a tizzy. The company said that sales trends were muted over the holiday season and as a result, comps for fiscal 4Q17 were down 5.1% quarter-to-date as of January 6, 2018, prompting a revision to the earlier outlook.
Fiscal 2017 revenue is now expected to be in the range of $1.138 billion to $1.142 billion, down from the earlier projected range of $1.148 billion to $1.155 billion. Comps are likely to decline in the band of -1.0% to -0.7% as against earlier growth expectations of flat to up 0.75%. In fiscal 3Q18, the company reported 9.3% growth in revenue to ~$250 million, but the comps were down 1.3% due to the negative impact of hurricanes.
Dave & Buster’s is focusing on driving top-line growth through improvements in the amusement category as well as the food and beverage category. During the fiscal 3Q17 earnings conference call, management said that it would be adding more new game titles with a focus on proprietary (including virtual reality games) and other exclusive games. Also, the company is making improvements to its menu and improving the speed of service to better serve patrons.
Apart from opening new stores, the company is now emphasizing smaller format stores. At the fiscal 3Q17 earnings conference call, management stated that the long-term target was 211 new store openings, and it expects to open another 20 to 40 small format (15,000 to 20,000 square feet) stores. Management expects these stores to generate AUV (average unit volume) of $4 million to $5 million and a cash-on-cash return in the early 20s range.