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Dave & Buster’s predicts ‘volatility’ in back half of 2019

With comps falling 1.8% in Q2, the eatertainment chain once again lowered its earnings guidance.
Photograph: Shutterstock

Dave & Buster’s stock price dropped more than 8% early Wednesday after the eatertainment chain reported poorer-than-expected sales and lowered its earnings forecast.

Further, the Dallas-based chain said it is reviewing its planned store openings for late 2020 into 2021, with an eye toward “flexibility in terms of the pace,” CEO Brian Jenkins told analysts during a conference call Tuesday.

“Our decision to reset guidance was not taken lightly,” Jenkins said. “We have many reasons to be encouraged for the back half of the year. But, at the same time, we are cognizant of recent volatility and potential risk.”

For the quarter ended Aug. 4, Dave & Buster’s reported a same-store sales decline of 1.8% while revenues increased 8%, to $344.6 million.

The company revised its fiscal 2019 guidance to forecast a same-store sales drop of 2% to 3.5%, editing the previous estimate of a 1.5% decline to a modest 0.5% increase. Dave & Buster’s had previously downgraded its forecast in June.

Company executives blamed the 132-unit chain’s struggles on last year’s successful introduction of virtual reality gaming, which was tough to surpass despite the addition of several new VR experiences in 2019.

“We introduced the roller coaster last year with both platform and a very popular title in ‘Jurassic World,’” Jenkins said. “And that proved to be difficult to match and roll over. The trial, the per capita lift we saw with that launch, was impressive, and the rollover was difficult.”

In addition to adding a “Terminator” virtual reality experience in November, tied to a movie release, Dave & Buster’s is focusing on finding ways to boost food and beverage sales. Currently, only about 50% of customers purchase something to eat or drink at the chain, which is well-known for its video games and other entertainment, Jenkins said.

So Dave & Buster’s is adding 50-foot-tall, LED-enabled “wow walls” in 35 units to pump up the energy in dining rooms and promote food and beverage offerings.

“The awareness challenge still exists,” Jenkins said.

The large-format video screens also offer the opportunity to experiment with esports (which the chain tested earlier this year) and, potentially, sports betting.

“As we improve this offering, it will bode well for how we might be able to leverage that, both in our esports leanings as well as what it may mean in terms of our position with partners in the sports betting arena,” he said. “So we're open-minded to that. We're open-minded to the partnerships.”

Dave & Buster’s plans to roll out a mobile app next month, which will allow customers to purchase and recharge gaming cards, play games and earn loyalty points. The chain, of course, will be able to collect consumer data to offer targeted marketing.

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