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Dave & Buster’s Stock Gets a Boost from Better-than-Expected Q1

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Stock up ~17%

On June 12, Dave & Buster’s Entertainment (PLAY) stock soared 16.7% to $55.82 following better-than-expected first-quarter results. On a YoY basis, its top and bottom lines registered growth of 9.2% and 6.1%, respectively. However, the company’s comps (comparable store sales) continued to disappoint. For the first quarter, comps were down 4.9% due to lower special event sales and walk-in sales.

The rise in the stock price has helped mitigate YTD losses. As of June 11, Dave & Buster’s stock was down 13.3%. As of June 12, the stock was up 1.2% on a YTD basis. In comparison, peers Jack in the Box (JACK) and Darden Restaurants (DRI) are down 13.4% and 3.3%, respectively. Dunkin’ Brands (DNKN) is up 5.4% as of June 12.

Strategic initiatives likely to help sustain the momentum

Dave & Buster’s has been focused on enhancing its games portfolio with special emphasis on VR (virtual reality) games to attract more customers. The company plans to launch its first VR game, Jurassic World VR Expedition, in the next few days.

Also, the company is making improvements to its menu and improving service speed to better serve patrons. The company will be launching new chicken and steak products in the latter half of the year. The company said it was happy with the customer response to its new angus burger.

Apart from opening new stores, the company is now emphasizing smaller format stores. The company is targeting 14 to 15 new store openings in fiscal 2018 including two smaller format stores. Smaller format stores are expected to generate an AUV (average unit volume) of about $4 million to $4.5 million and a cash-on-cash return in the low 20s range.

The company also named CFO Brian Jenkins as the new CEO. Jenkins will take over responsibility from Stephen M. King when he retires in August.

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