Dave & Buster’s Entertainment stock dips on weak Q1 revenue, FY19 forecast

Dave & Buster’s Entertainment (PLAY) reported a 0.5% rise in earnings for the first quarter of 2019 due to lower income taxes provision and higher total revenues. The bottom line exceeded analysts’ expectations while the top line missed consensus estimates. The operator of entertainment and dining venues lowered its net income and revenues guidance for the full year 2019. Following this, the stock declined over 16% in the after-market session.

Net income inched up by 0.5% to $42.4 million and earnings grew by 9% to $1.13 per share. Total revenues rose by 9.5% to $363.6 million. This was driven by an 11.9% increase in Amusements and Other revenue and a 6.1% increase in Food and Beverage revenue.

Comparable store sales declined by 0.3% in the first quarter following a 4.9% decrease in the previous year quarter. The decrease was driven by a 0.6% decline in walk-in sales, though special events sales were up 3%. Comparable store sales increased by 1.8% in Amusements & Other but decreased by 3.3% in Food & Beverage. Non-comparable store revenues surged by 76.8% year-over-year.

Looking ahead into fiscal 2019, the company lowered its total revenues outlook to the range of $1.365 billion to $1.39 billion from the prior range of $1.37 billion to $1.40 billion. Comparable store sales are now anticipated to be down 1.5% to up 0.5% compared to the previous estimate range of flat to up 1.5%. Net income guidance is lowered to the range of $103 million to $113 million from the previous range of $105 million to $117 million.

For the full year, the company cut its EBITDA guidance to the range of $283 million to $295 million from the previous range of $285 million to $300 million. Total capital additions (net of tenant improvement allowances and other landlord payments) outlook remained unchanged at $190 million to $200 million.

The company continues to be on track to open 15 to 16 new stores in the fiscal year 2019. This represents unit growth of about 12%, consistent with its target of 10% or more annual unit growth. The company has opened seven new stores during the first quarter of 2019 and has already opened a store during the second quarter. Two more stores are expected in the second quarter of 2019. As of June 4, 2019, there were 8 stores under construction.

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During the first quarter, Dave & Buster’s repurchased about 1.3 million shares for $63.5 million. As of the end of the quarter, the inception-to-date total was 7.6 million shares for $393.3 million and the company had $206.7 million remaining under its share repurchase authorization. During the quarter, the company paid a quarterly cash dividend of $0.15 per share.

Shares of Dave & Buster’s ended Tuesday’s regular session up 1.90% at $51.53 on the Nasdaq. The stock has risen over 15% in the year so far and over 10% in the past three months.

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