Shares of Dave & Buster's (PLAY 46.70, -4.33, -8.49%) have slid to a six-month low, as the company's cautious guidance overshadows better than expected results for the third quarter.
The operator of entertainment and dining venues reported
above-consensus third quarter earnings of $0.30 per share on a 12.9% yr/yr
increase in revenue to $282.10 mln, which was also ahead of expectations.
Granted, the company beat top and bottom-line expectations, but comparable store sales declined 1.3% yr/yr. The decline resulted from a 0.7% contraction in walk-in sales and a 6.9% decline in special events sales. Food & beverage comparable sales contracted 5.0% while Amusements & Other comparable store sales bucked the trend, increasing 1.5%.
Operating income fell 22.1% to $15.50 mln while adjusted operating income declined 1.9%. The declines were owed to higher payroll and benefits expenses, higher store operating expenses, and higher depreciation and amortization expenses, which outweighed lower cost of food as a percentage of revenue.
Dave & Buster's raised the low end of its guidance for fiscal year 2018, expecting revenue between $1.243 bln and $1.255 bln, up from previous guidance for sales between $1.230 bln and $1.255 bln. Earnings before interest, taxes, depreciation, and amortization are expected between $268 mln and $277 mln after previous guidance called for EBITDA between $263 mln and $277 mln.
The company is hopeful that investments made in refreshing its gaming offerings will generate returns in the near future. To that end, Connect 4 Hoops and House of the Dead: Scarlet Dawn games were launched during the third quarter while the company's proprietary virtual reality game Dragonfrost is set for a December release. The market, however, has some misgivings about the company's ability to generate enough sales to outweigh higher operating costs and costs associated with updating Dave & Buster's game offerings.
The company expects that fiscal 2019 revenue will grow in the high single digits while EBITDA is expected to show mid-to-high single-digit growth. The company expects to open 15 to 16 new locations during fiscal 2019 while the lease for one older store will not be renewed.