On the surface, Dave & Buster’s third-quarter results were much like most of its other recent reports: disappointing.
The food-and-games chain reported a 1.1% decrease in revenue in the period and a wider net loss of $1.22 per share, both of which fell below Wall Street expectations. The company’s same-store sales fell 4% in the period.
Yet the company’s sales improved throughout the quarter. Same-store sales were down 1% in October. And the improvement continued in November, though sales remain negative. Food and beverage same-store sales were up for the second straight quarter and, CEO Tarun Lal said, October was its best food sales month so far this year.
All that helped send the company’s stock soaring more than 14% on Wednesday.
“What’s really working just now is smart value offers, and these are not necessarily discounts, but packages that are put as a combo offer that allows our guest to appreciate and enjoy both our games and our food and beverage offerings,” Lal told analysts on Tuesday, according to a transcript on the financial services site AlphaSense.
Dave & Buster’s is not necessarily out of the woods, but for the company the improvement is a long time coming.
Its 4% same-store sales decline was the 11th straight negative quarter, a streak that led to the company’s management change early this year and a revitalization plan that Lal was tasked with putting in place.
And even with the sequential improvement during the period, Dave & Buster’s same-store sales still decelerated on a one- and two-year basis during the period.
Even with Wednesday’s performance, the company’s stock is still down 29% so far this year.
The chain also needs to boost sales of its games, which is where Dave & Buster’s profitability comes from.
Dave & Buster’s has started rolling out new games this year and plans to do so “more effectively” next year, with plans to introduce 10 new games throughout the year.
The company introduced the “Human Crane” at some of its locations and plans to roll it out at the rest of its venues this year. The crane is like a claw machine but customers are the ones who grab the prizes. “We are seeing a lot of interest and excitement around the Human Crane,” Lal said, noting that the game is in 70% of the system. “These are incredible games, people absolutely love them.”
Dave & Buster’s earlier this year made changes to its menu that it rolled out in October, which has helped build food-and-beverage sales. The company said that it is generating higher average checks.
The company is also working to improve operations, which has helped reduce turnover and has encouraged customers to stay longer.
Executives are also testing a refined remodel prototype that they believe will be more efficient than its past remodels, which lifted sales by 700 basis points but included “ineffective spend.”
“We overinvested capital in areas that did not really impact guest experience and it was kind-of wasted,” Lal said. “We are saving a significant amount of capital now in our remodels.”
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