A month has gone by since the last earnings report for Dave & Buster’s (PLAY). Shares have lost about 17.4% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Dave & Buster’s due for a breakout? Before we dive into how investors and analysts have reacted as of late, let’s take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Dave & Buster’s Posts Wider-Than-Expected Loss in Q1
Dave & Buster’s reported dismal first-quarter fiscal 2020 (ended May 3, 2020) results, wherein earnings and revenues not only missed the Zacks Consensus Estimate but also declined on a year-over-year basis.
Even though the coronavirus pandemic materially impacted the company’s first-quarter results, the company has taken aggressive measures to enhance its liquidity position to tide over the crisis. It is also resorting to store re-openings with limited capacity to boost its top-line growth.
Adjusted loss during the quarter was $1.37 per share, which was 73.4% wider than the Zacks Consensus Estimate of loss of 79 cents. The company reported earnings per share of $1.13 in the year-ago quarter.
Let’s delve into the quarterly numbers.
Detailed Revenue Discussion
Quarterly revenues of $159.8 million missed the consensus mark of $187 million by 14.6%. The top line also declined 56% from the prior-year quarter’s number. The decline was primarily attributed to lower operating weeks due to temporary store closures from mid-March. Due to this, Amusements and Other revenues as well as Food and Beverage revenues fell considerably during the quarter.
Food and Beverage revenues (40% of total revenues in the fiscal first quarter) decreased 56.9% year over year to $63.9 million, while Amusement and Other revenues (60% of total revenues) fell 55.5% to $95.9 million.
Comps Details
Comparable store restaurant sales declined 58.6% in the fiscal first quarter compared to a fall of 0.3% in the year-ago quarter. The decline was primarily caused by temporary store closures, thus, leading to lower customer volumes.
Non-comparable store revenues in the reported quarter declined 17.2% to $22.6 million compared to $27.3 million in the year-ago quarter. The decrease was primarily driven by temporary store closures.
Operating Highlights
Operating loss in the fiscal first quarter totaled $61.4 million against an operating profit of $57.8 million in the prior-year quarter. Operating margin came in at negative 38.4%, down 5430 bps from the year-ago quarter. Notably, a decline in traffic due to temporary store closures has negatively impacted the operating results for the fiscal first quarter.
EBITDA was ($10.8 million) against $98.1 million in the prior-year quarter. Also, EBITDA margin contracted 3370 bps year over year to a decline of 6.7%.
Net cash provided by operating activities was $16.8 million in the fiscal first quarter compared with $85.7 million in the year-ago quarter.
Balance Sheet
As of May 3, cash and cash equivalents totaled $156.8 million compared with $20.4 million as of May 5, 2019.
Long-term debt summed $735.3 million at the end of the reported quarter, up from $632.7 million at the end of Feb 2, 2020.
Due to uncertainties tied to the COVID-19 pandemic, the company suspended its share-repurchase activity as well as the dividend payment program.
Stores Update
Although Dave & Buster’s was operating only through delivery and takeaway services from late March through late April, it started to initiate dine-in openings thereafter. With 28 stores already reopened, the company expects to re-open 48 stores across 15 states by Jun 12.
Company-owned stores at the end of the fiscal first quarter totaled 137 compared to 127 stores in the prior-year quarter.
Fiscal 2020 Guidance
Owing to the unprecedented and evolving nature of the coronavirus outbreak, the company has not provided its fiscal 2020 financial guidance at this time.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates. The consensus estimate has shifted 12.85% due to these changes.
VGM Scores
Currently, Dave & Buster’s has a poor Growth Score of F, however its Momentum Score is doing a lot better with a B. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.