Dave & Buster’s Entertainment, Inc. (NASDAQ:PLAY) has seen considerable success in its expansion initiatives and strategic moves, contributing to a new 52-week high of $48.75 on December 13. While the stock closed at $48.30, up 4.18% from the previous day, the past three months have seen a notable 32% rally, outpacing the Zacks Retail – Restaurants industry’s 5.6% growth.
Despite concerns related to high costs and economic risks, PLAY remains focused on positive growth factors, making it an intriguing choice for investors. Let’s delve into the key factors supporting investor confidence amid prevailing challenges.
Robust Expansion Efforts
PLAY’s expansion strategy revolves around increasing its presence in new and existing markets, evident in the opening of two new stores and one Main Event store during the third quarter of fiscal 2023. Post-quarter, the company continued its expansion with new stores in Colorado Springs, CO, Lafayette, LA, and Pooler, GA, all reporting solid performances. For fiscal 2023, PLAY aims to open a total of 16 new stores, including 11 Dave & Buster’s and 5 Main Event locations, and relocate the Vernon Hills store.
Beyond domestic endeavors, PLAY is making significant strides in global expansion. Deals with the Malpani Group in India (15 new stores) and NightOwl Entertainment Group in Australia (5 stores) mark the company’s commitment to international growth in the APAC and MEA regions.
Strategic Initiatives for Sales Boost
PLAY is actively engaged in streamlining store operations, enhancing guest experiences, and improving its food, beverage, and entertainment offerings. A multi-phase approach to menu enhancement has yielded positive results, with a 5% increase in food and beverage revenue per check and improved cost of sales during testing in the fiscal third quarter. The company plans to launch the new menu system-wide in April 2024.
Additionally, a focus on digitalization includes initiatives such as the domestic rollout of OneDine server tablets, offering an efficient means for order execution and transaction closure. The company aims to update IT infrastructure in 61 D&B stores by the end of 2023, with a complete rollout expected in fiscal 2024. Emphasizing the D&B loyalty program adds further relevance to its mobile app, driving higher engagement through challenges and rewards.
Challenges and Economic Risks
While PLAY navigates its growth trajectory, challenges persist in the form of a challenging macro environment. Inflationary pressures on labor and commodities pose ongoing concerns, impacting the company’s total operating expenses, which rose to $1,389.2 million in the first nine months of fiscal 2023.
Despite these challenges, analysts project growth for PLAY, estimating a 13.1% increase in earnings and a 14.3% rise in sales for fiscal 2024. This positive outlook, coupled with the company’s resilience in the face of challenges, indicates PLAY’s potential to weather economic headwinds and continue its growth trajectory.
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