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With shares hovering around multi-year lows and down by nearly 75% on a yr/yr basis, expectations were at rock bottom levels ahead of Dave & Buster's (PLAY) 4Q25 earnings report. Against this bearish backdrop, the entertainment and dining company delivered better-than-feared results, offering some hope that recently appointed CEO Kevin Sheehan has the beleaguered company heading in the right direction. Although PLAY didn't provide formal EPS or revenue guidance, it did forecast a decline in FY26 capex to less than $220 mln compared to $330.2 mln in FY25, which has investors cheering.

PLAY's results were far from spectacular -- comparable store sales fell by 9.4% and the company missed revenue expectations -- but the anticipated decline in capex and some encouraging commentary surrounding foot traffic and food and beverage sales trends in March and April has created optimism.

• Mr. Sheehan, who replaced Chris Morris as CEO last December, has implemented a "back-to-basics" strategy that aims to undo the missteps of the past few years. In his view, PLAY overwhelmed customers with too many menu changes and store remodels, resulting in seven consecutive quarters of negative comps. The back-to-basics strategy reduces menu complexity be eliminating low-performing items and improving kitchen efficiency, while also only targeting high-return locations for remodeling, providing some relief to capex.
• Under Morris's leadership, PLAY was aggressive with store remodels, completing 44 remodels since 2023. On the positive side, the remodels have shown strong results, outperforming non-remodeled locations by approximately 9% post-renovation. The issue, though, is that the high upfront costs and incremental labor and marketing costs associated with the remodels were straining PLAY's margins and earnings.
• In Q4, operating margins plunged to 8.3% from 15.0% in the prior year period, while EPS fell by 22% to $0.69. By avoiding overextension in its remodeling plans, PLAY should be able to stabilize its margins. Whether its menu simplification efforts and new initiatives like "Eat & Play Combo" can reverse the negative comp trend remains to be seen. The improved foot traffic and sales trends in March and April are a positive sign, but PLAY may be hard-pressed to maintain that momentum given the intensifying macro headwinds.

PLAY's Q4 results continued to reflect consumer related and operational challenges. However, the company's back-to-basics strategy to reverse prior missteps and its more conservative capex plans for FY26 is providing optimism that healthier margins and profits may be on the horizon.