William Blair has maintained its Outperform rating on Dave & Buster's (NASDAQ: PLAY), despite anticipating a continued downturn in same-store sales through the end of fiscal 2024.
The firm now expects a 5% decline in same-store sales for the full year, adjusted from the previously estimated 3% decrease. The revision comes in light of current challenging trends in the near term.
Despite the projected drop in sales, the firm has increased its full-year margin projection for Dave & Buster's. Analysts now forecast a unit-level margin contraction of 60 basis points to 29.2%, which is an improvement from the prior estimate of 29.0% and above the consensus of 28.6%. This adjustment reflects a stronger-than-anticipated margin performance.
The updated margin outlook has also led to a revision of the 2024 earnings per share (EPS) projection for Dave & Buster's. The new EPS estimate is set at $2.52, marking a 13% decrease year-over-year and is slightly below the consensus of $2.64. The adjusted EPS reflects the impact of the anticipated decline in same-store sales.
Looking ahead to 2025, the firm remains positive about Dave & Buster's prospects for a rebound in same-store sales. The optimism is based on the expectation that various initiatives, including store remodels, strategic game pricing, marketing optimization, and continued improvements in food and beverage offerings, will collectively start to yield positive results.
Dave & Buster's Entertainment reported impressive second-quarter earnings that exceeded analyst estimates. The company posted adjusted earnings per share of $1.12, surpassing projections of $0.91.
Despite a 2.8% year-over-year increase, the revenue of $557.1 million fell slightly short of the anticipated $567.33 million. Analysts from Truist Securities and BMO Capital Markets continue to view the company positively, emphasizing its strategic initiatives and cost-efficiency measures.
Dave & Buster's has been actively hiring special events sales managers, remodeling stores, and increasing targeted digital marketing efforts, which are expected to boost future revenue. Truist Securities forecasts a modest acceleration in comparable store sales (SSS) to -5.0% in Q3 2024 and -3.0% in Q4, before turning positive in Q1 2025 with a projected increase of +1.5%.
InvestingPro Insights
As Dave & Buster's (NASDAQ:PLAY) navigates the projected downturn in its same-store sales, it's important to consider the company's financial health and market performance. According to InvestingPro data, Dave & Buster's currently has a market capitalization of approximately $1.18 billion, and a Price/Earnings (P/E) ratio of 12.63. This P/E ratio is lower than the adjusted P/E for the last twelve months as of Q1 2025, which stands at 9.9, suggesting that the stock may be undervalued relative to its earnings performance.
InvestingPro Tips highlight that Dave & Buster's operates with a significant debt burden and that its short-term obligations exceed its liquid assets, which could pose challenges in the near term. However, management's aggressive share buyback strategy could indicate confidence in the company's future performance. Additionally, while analysts have revised their earnings forecasts downwards for the upcoming period, the company is expected to remain profitable this year, with a profitable track record over the last twelve months.
Investors should also note that the company's stock is trading near its 52-week low and has experienced significant price drops over the last three and six months. Despite these challenges, the company's ongoing initiatives, including store remodels and strategic game pricing, could contribute to a potential rebound in performance. For those interested in a deeper analysis, InvestingPro offers numerous additional tips on Dave & Buster's, accessible through their platform.
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