Q2 2018 numbers
On September 14, Dave & Buster’s Entertainment (PLAY) stock rose 7.9% in response to the company’s robust fiscal second-quarter results. The quarter ended on August 5.
The company’s revenue of $319.2 million and adjusted EPS (earnings per share) of $0.84 beat the analyst estimate of $311.9 million and $0.67, respectively. On a year-over-year basis, revenue was up 13.7% driven by new store openings. The company expects 14 to 15 new store openings in fiscal 2018.
Also, the company announced a $100 million additional share repurchase program and started a dividend program. Dave & Buster’s also raised the revenue outlook for fiscal 2018. The company expects revenues to increase to $1.23 billion–$1.26 billion versus earlier expectations of $1.20 billion–$1.24 billion.
Stock up an impressive 12.5% YTD
On a YTD basis, Dave & Buster’s stock is up 12.5% as of September 14. In comparison, peers Dunkin’ Brands (DNKN), Darden Restaurants (DRI), and Shake Shack (SHAK) have risen 15.2%, 24.0%, and 32.4%, respectively, as of September 14. However, Jack in the Box (JACK) has fallen 13.8% YTD.
The company is working on driving its top line amid a competitive environment. Dave & Buster’s has been focused on enhancing its games portfolio with special emphasis on VR (virtual reality) games to attract more customers. After the launch of Jurassic World VR Expedition in June, the company plans to add a few more VR games to its roster in the coming days. Also, the company is adding new items to the menu and improving the speed of service.
However, the declining trend seen in comparable-store sales is an area of concern. The company’s comps have declined in the first two quarters of fiscal 2018. In the second quarter of 2018, comps were down 2.4% due to a decline in walk-in sales.
A look at changes to PE valuation
As of September 14, Dave & Buster’s was trading at a 12-month forward PE multiple of 20.8x. Since reporting its second-quarter results, its forward PE ratio has increased 6.7%.
Darden Restaurants, Jack in the Box, Dunkin’ Brands, and Shake Shack are trading at 12-month forward PE ratios of 20.9x, 17.8x, 25.6x, and ~83.0x, respectively.