In the summer of 2020, it seemed as if the eatertainment industry was headed for disaster.
With dining rooms closed and no one heading out to play games, brands like Dave & Buster’s were put in dire straits. The chain warned of laying off 1,300 workers across seven states and foreshadowed a potential bankruptcy.
Flash forward two years, vaccinations have widely been implemented and restrictions have lifted almost everywhere. The open economy, combined with an eagerness to socialize from consumers, have fueled a strong comeback for Dave & Buster’s.
“There’s a lot happening at Dave & Buster’s, and we are extremely excited about the meaningful upside potential for this company and our stakeholders,” said interim CEO Kevin Sheehan on the company’s Q1 earnings call.
In Q1, Dave & Buster’s set multiple financial marks. Revenue increased 24.1 percent to a record $451.1 million, compared to $265.3 million last year and $363.6 million in 2019. The company also set new highs for net income ($67 million versus $19.6 million in 2021 and $42.2 million in 2019) and adjusted EBITDA ($143.2 million compared to $76.7 million in 2021 and $98.2 million in 2019).
Comp sales grew 10.9 percent compared to Q1 2019, and walk-in sales increased 14.7 percent versus the same period. Dave & Buster’s loyalty program saw 800,000 additional downloads in the first quarter, a 23.9 percent increase year-over-year. That gives the chain 3.65 million user profiles; of that number, 1.9 million have been active in the past six months.
READ MORE: Dave & Buster’s Pulls Multiple Operational Levers to Bring Back Guests
Special events business declined 34.6 percent against three years ago, but that’s still a sequential improvement from Q4.
“We have this great proposition that would be super for corporate accounts to come and have their events in our stores,” Sheehan said. “And it’s a heck of a lot better than going to a smug hotel where you’re paying up the nose to have their event room and you buy a bottle of water, it’s $8 kind of thing, to coming in and having a joyful event and coming to Dave & Buster’s and having the meeting and having food and then having everybody share in having a lot of fun in our case. So we think there’s a huge opportunity there, too.”
Dave & Buster’s posted an adjusted EBITDA margin of 31.8 percent, 480 basis points higher than 2019. That performance was attributed to a higher amusement mix (66 percent compared to 59 percent in 2019) and a more efficient labor model.
Dine-in customers are now able to order and pay through xDine, an online ordering platform. It allows servers to handle more tables, meaning a smaller headcount in the front of house.
“We are already seeing the benefits of our now fully implemented service model that allows our guests to choose their service experience. The data pulled from our guest satisfaction tool showed our overall guest satisfaction and Net Promoter Scores hit a new high watermark in May,” COO Margo Manning said.
Key promotions also boosted sales. During April, Dave & Buster’s brought back its limited-time Eat and Play Combo. Manning said it allowed the brand to capitalize on “pent-up demand” from value-oriented guests. Because of the promotion, same-store sales rose 21.5 percent in April, much higher than February (flat) and March (12.5 percent).
With record-breaking sales in the background, Dave & Buster’s is keeping innovation at the forefront to ensure its recovery remains intact.
For the late-night daypart, which has lagged during COVID, the company is leveraging a value menu and an “enhanced late-night vibe” with live streaming DJ sets and exclusive visuals broadcasted throughout stores. The initiatives proved worthwhile in Q1, with late-night walk-in comp sales growing 9 percent versus 2019.
In addition to those enhanced activities, Dave and Buster’s will launch 10 new arcade games and two virtual reality titles based on Transformers and Top Gun: Maverick and roll out new food and beverage items this summer. Also, a new website will go live in Q3, bringing new special event capabilities, e-commerce, and programming content. The platform was built in way that Dave & Buster’s can regularly fold in new capabilities.
READ MORE: Dave & Buster’s Inches Closer to Sports Betting
Sports betting is still on the horizon as well. CFO Michael Quartieri said Dave & Buster’s has an announcement coming with “three or four different agreements that together I think drive a really fantastic opportunity for this company.” The brand is spending millions to make sure its audio is correct in all of the sports sections.
“Once you get these people in for sports betting, they’re going to stay longer,” Quartieri said. “… They’ll have another drink or two, they’ll have an appetizer. And so, the spending behavior will be exactly what we’re hoping for.”
The chain ended Q1 with 147 units, including three openings this year in Sioux Falls, South Dakota; Brooklyn; and Modesto, California. The plan is to have eight openings in fiscal 2022. As Dave & Buster’s engages in new store development, it’s moving through a refresh/remodel program and evaluating relocations in some legacy markets.
The company showcased its strong balance sheet in April with the announcement that it would purchase fellow eatertainment chain Main Event for $835 million from Ardent Leisure Group Limited and RedBird Capital Partners. The transaction should close in the next several weeks. When the acquisition finalizes, Chris Morris, who serves as Main Event’s CEO, will lead both brands.
“He is an experienced leader and is excited to engage with our shareholders in the months ahead,” Sheehan said. “Under Chris’ leadership, I anticipate that our positive momentum will continue as we continue to make progress toward realizing our ultimate potential. I think he’s just going to do tremendous things with this brand.”
