Dave & Buster’s Patrons Are Whacking Too Much Mole and Not Eating or Drinking Enough

Chefs' Take: In this adult Chuck E. Cheese the food and drink offerings need to at least be as good as the skee-ball.
— Jason Clampet

Dave & Buster’s Entertainment Inc. has a problem: Customers aren’t eating and drinking enough in between rounds of billiards and whack-a-mole.

The company suffered its worst stock rout ever on Wednesday after posting anemic second-quarter growth, hurt by declines in food-and-drink sales. The sluggish restaurant business offset Dave & Buster’s more robust entertainment offerings, which include arcade games, bowling and carnival-style attractions.

The company, which has about 100 locations, has been pulled into a broader slump for casual-dining restaurants. Food and beverages account for roughly 44 percent of revenue, and customers lately haven’t shown as much interest in the fare. Chief Executive Officer Steve King said he hopes to enliven that part of the business with new menu items, including Dynamite Fried Shrimp and a set of rum-based drinks called Monster Isle Punch.

“We’re taking a thoughtful approach to reignite the momentum there,” he said on a conference call Tuesday.

For now, the Dallas-based company is a painful dichotomy: Its “amusements” business saw sales jump 4.7 last quarter, while its food and bar categories both fell more than 3 percent.

The company used a “Summer of Games” promotion to draw in customers, touting attractions like Rock ’Em Sock ’Em Robots and the world’s largest Pac-Man video game. Trouble was, many of those people stuck around the arcade area of the chain’s cavernous locations, rather than venturing into the restaurant or bar.

Missing Estimates

Total same-store sales increased 1.1 percent in the period, short of the 2.6 percent average estimate tracked by Consensus Metrix.

The shares, which trade under the ticker PLAY, slipped as much as 11 percent to $51.75 in New York on Wednesday. That marked the biggest drop since the company’s initial public offering in October 2014. The stock had gained 3.3 percent this year through Tuesday.

Heavier competition, higher operating expenses and a bit of cannibalization from its own locations also are taking a toll, Dave & Buster’s said. But the industrywide restaurant downturn may be the biggest hurdle. Chains like Applebee’s are closing scores of locations as they cope with shifting patterns in how Americans dine out.

“The environment for casual dining remains challenged,” King said. “We are certainly not immune to the macro trends around us.”

©2017 Bloomberg L.P.

This article was written by Craig Giammona from Bloomberg and was legally licensed through the NewsCred publisher network. Please direct all licensing questions to [email protected].

Photo credit: Dave & Buster’s Entertainment Inc. has a problem: Customers are aren’t eating and drinking enough in between rounds of billiards and whack-a-mole. / Bloomberg