Dave & Buster’s (PLAY) shares are trading up over 2% in aftermarket trading on signs of recovery despite a somewhat lackluster Q4 performance, which saw a 10.8% decline in sales and a 33% drop in profit per share. The company’s interim CEO, Kevin Sheehan, has acknowledged missteps by previous leadership in marketing and operations but remains optimistic about future prospects following corrective measures. The outlook for fiscal 2025 includes capital expenditures of less than $220 million and cash interest expenses of between $130 million and $140 million. Despite a recent 2% uptick in share prices, analyst sentiment remains cautious, with adjusted expectations reflecting a challenging recovery trajectory.
Revenue Misses Target
Dave & Buster’s Entertainment operates entertainment and dining venues across North America, targeting both adults and families. Its venues feature a diverse menu and offer a wide range of entertainment options, primarily focused on gaming and live sports viewing, as well as other televised events.
The company reported a year-over-year decrease in revenue of 10.8% for the fourth quarter, amounting to $534.5 million, which fell short of analyst projections by $11.33 million. Comparable store sales also dropped by 9.4% year-over-year. The company’s net income declined significantly, totaling $9.3 million, or $0.24 per diluted share, compared to $36.2 million, or $0.88 per diluted share, in the previous year. Adjusted EBITDA decreased by 16.2% to $127.2 million, representing 23.8% of the revenue. On a non-GAAP basis, adjusted net income stood at $26.8 million or an earnings per share of $0.69, down from $42.0 million or $1.03 per diluted share a year earlier.
For the full fiscal year 2024, Dave & Buster’s revenue was $2.1 billion, marking a 3.3% decline from fiscal 2023. Comparable store sales dropped by 7.2%. Net income for the year was $58.3 million, or $1.46 per diluted share, compared to $126.9 million, or $2.88 per diluted share, in the fiscal year 2023. Adjusted EBITDA for the year fell by 8.9% to $506.2 million, accounting for 23.7% of revenue. On a non-GAAP basis, adjusted net income was $101.4 million or $2.53 per diluted share, down from $156.9 million or $3.56 per diluted share previously.
Looking ahead to fiscal 2025, the company anticipates capital expenditures of under $220 million, pre-opening expenses of around $20 million, and cash interest expenses ranging from $130 million to $140 million.
Analysts are Cautious
Analysts following the company have struck a cautious tone on Dave & Busters’ immediate prospects. Truist analyst Jake Bartlett has reduced the price target on the shares to $21 (from $27) while maintaining a Hold rating, noting expectations that the company would fall short on both same-store sales and adjusted EBITDA but that the 38% decline in the stock year-to-date already reflects these expectations. March saw some improvement in comparable sales, although they remain in negative territory, and new game installations are ongoing. Bartlett indicates that it is still premature to assess whether management’s efforts are effectively overcoming the company’s existing challenges.
Dave & Busters Entertainment is rated a Hold overall based on the recent recommendations of three analysts. The average price target for PLAY stock is $21.00, which represents a potential upside of 29.71% from current levels.
