A tough restaurant economy hits Dave & Buster's

Stock in the food-and-games chain, which also owns Main Event, plunged early Thursday following a weak sales report.
Dave & Buster's
Dave & Buster's same-store sales have turned negative on a two-year basis. | Photo: Shutterstock.

Has the eatertainment trend run its course? Maybe not. But some of the chains that benefited from consumer demand for more experiences appear to be losing their momentum.

The latest example is Dave & Buster’s, which on Wednesday reported that its same-store sales fell 5.6% in the first quarter ended May 5. The news sent the company’s stock down nearly 10% in pre-market trading.

That report comes on the heels of an earlier report from TopGolf Callaway, which owns the golf-centric TopGolf concept, whose same-store sales fell 7%. That company said those results were expected, as the company comes down off of excessive, post-COVID demand for its facilities.

Dave & Buster’s, however, is not coming off that kind of demand, at least in the first quarter. The company’s same-store sales on a two-year basis was down 9.7%. That is a distinct slowdown from the 12% two-year same-store sales growth in the fourth quarter.

Company executives blamed the economy. “It’s a complex macro environment, and it’s been challenging,” CEO Chris Morris told analysts on Wednesday, according to a transcript on the financial services site AlphaSense.

Dave & Buster’s did note that sales trends improved throughout the quarter. And executives spent much of the earnings call pointing out the company’s efforts, including new marketing that features a loyalty program and upgrades to its food and beverage offerings.

The company in the past had not paid as much attention to the quality of its food, given that its most profitable area of business is the entertainment. Yet growing competition from other providers has led executives to conclude that improvements are needed in that area.

It has also added a new service model to improve customer satisfaction and is remodeling stores, which thus far has generated “double-digit” improvements in sales and traffic.

The company is also focusing on its special events business, having recently added 20 sales managers that had been cut during the pandemic. “We expect this to have a meaningful, positive impact on the revenue trends in this segment, which are already approaching 2019 levels overall,” Morris said.

Executives noted, however, that the company took “fewer price increases than our peers since COVID” and also noted that a menu change in 2021 led customers to buy cheaper items. The company has been testing ways to fix those problems.

“We’re encouraged by the fact that throughout the quarter we’ve seen trends improve as our initiatives have started to take hold,” Morris said. “And those initiatives are a combination of both price and traffic.”

The comments were not, at least at the moment, enough to assuage investor concern about sales trends at the Dallas-based Dave & Buster’s. Even before the earnings report, its stock had lost all its gains from a surge earlier in the year. Its stock by April was up 26% on the year. Yet by close on Wednesday it was down 6.5% so far in 2024 during a year in which the S&P 500 is up 14%. And now it’s down further.

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