PLAY stock has risen 4.5% YTD
As of September 5, Dave & Buster’s Entertainment (PLAY) stock has risen 4.5% YTD (year-to-date). In comparison, peers Dunkin’ Brands (DNKN), Darden Restaurants (DRI), and Shake Shack (SHAK) have risen 17.1%, 23.8%, and 36.1%, respectively, as of September 5. However, Jack in the Box (JACK) has fallen 10.8% YTD.
PLAY stock could rise after the announcement of the company’s fiscal second quarter of 2018 results on September 14. Analysts are upbeat about Dave & Buster’s top- and bottom-line growth in the second quarter. Its second-quarter revenue is expected to grow 12.3% to $315.3 million, while its adjusted EPS is expected to rise 13.6% to $0.67.
Factors driving the stock
Dave & Buster’s has taken to store openings to drive its top line. The company now has an emphasis on opening smaller format stores. It’s targeting 14–15 new store openings in fiscal 2018, including two smaller 17K format stores.
Smaller format stores are projected to yield AUVs (average unit volumes) of $4 million–$4.5 million. It’s expected to generate a cash-on-cash return in the low 20% range. Over the long term, Dave & Buster’s expects 231–251 locations across the United States and Canada. The overall count is inclusive of the expected 20–40 17K format stores.
The company is also overhauling its menu and improving the speed of service to better serve its patrons. It will be introducing new chicken and steak products in the latter half of the year.
Dave & Buster’s has been focused on enhancing its games portfolio with a special emphasis on VR (virtual reality) games to attract more customers. The company launched its first VR game, Jurassic World VR Expedition, in June.
For fiscal 2018, it expects its revenue to be $1.20 billion–$1.24 billion. Comps on a comparable basis are projected to decline in the low- to mid-single digits.