Much of the business at Dave & Buster’s has recovered from a pandemic that at one point had many investors worried that it would not survive. Same-store sales rose 19% in the company’s fiscal fourth quarter, the company said on Tuesday, and are now up 14% compared with the same period in 2019.
Profit margins are up, too. Thanks to a combination of those strong sales, higher prices and a focus on operating efficiencies, store-level operating margins were 30% of revenues in the period, up 50 basis points from the prior year and 230 basis points from a year earlier.
The results, combined with a strong performance in the third quarter, mean the owner of its 152-unit namesake chain, along with the 55-location Main Event, finished 2022 on a high note. “We’ve just pulled together two very strong quarters,” CEO Chris Morris told investors on Tuesday, according to a transcript on the financial services site Sentieo/AlphaSense.
Not much of that mattered to investors, however. The company’s stock fell 5% in after-hours trading, largely on these comments from CFO Michael Quartieri:
“Quarter-to-date, our comp store sales are roughly flat to down very low single digits relative to the same period last year,” he said, according to Sentieo, before adding, “which is still up nicely versus the pre-pandemic period.”
The comment forced executives to spend much of Tuesday’s earnings call explaining that sales were fine and there were no underlying problems. Dave & Buster’s current quarter started Jan. 30.
Executives said early-year results were simply noisy. The company is comparing its results from early-year 2022, when sales surged. Dave & Buster’s in the comparison period, for instance, reported 274% same-store sales growth. There were also “calendar mismatches” that influence sales results and spring break timing also caused issues.
“There’s just a lot of noise in our numbers as we’re starting this quarter,” Morris said.
“We’ve looked at our sales figures to try to understand [if] there’s anything more than just the timing of spring breaks and lapping a difficult comparison,” he added. “We’re not seeing anything that would suggest there’s a significant change in the fundamentals of this business. So our best guess is … we think that when we get through this tough comparison that the business is going to continue to perform nicely in the near term and over the long term.”
Dave & Buster’s early-year sales challenges do belie results from companies like Texas Roadhouse and Darden Restaurants, which reported strong sales and traffic thus far this year.
Yet investor reaction to the results may preview challenges executives could have in the coming months explaining sales trends. Many elements could influence sales in the coming weeks, including difficult comparisons from a year ago.
In addition, customers are normalizing their behavior, either returning to dine-in service from takeout options, or they’re simply calming down some of their excess spending after unleashing some pent-up demand.
Then again, there remain some persistent concerns in the industry that last year’s run of high menu-price increases could trigger cutbacks in consumer spending. Restaurant operators will be pressured to determine whether slowdowns are the result of tough comparisons or something longer-term.
Dave & Buster’s executives, however, said they saw nothing disconcerting. “If there was anything of note of any one of the two brands dramatically underperforming or overperforming that was driving the overall results, we would specifically call that out to you guys,” Morris said.
Revenue at the company was $563.8 million, up 64% from 2021—thanks largely to the acquisition of Main Event. Including the latter chain’s contribution from a year earlier, revenues grew 27.7%. They are up 30% from where they were in 2019.
Net income was $39.1 million, or 80 cents per share, up from $25.7 million or 52 cents a year earlier.
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