Q4 revenues are projected to drop by at least 70 percent.
Rises in COVID cases and added dining restrictions have weighed heavily on Dave & Buster’s, which saw its number of open stores drop from 104 to 89 in early January.
CEO Brian Jenkins said at the ICR Conference on Monday that 97 stores are now open and more than 100 are expected to open by the end of the week. However, the brand anticipates that the 27 California and New York stores will remain closed for the rest of Q4. Jenkins said the timing of those states is less predictable. With the rise in cases in California, he predicted that the Golden State will be the last market to open, possibly into Q2.
“Based on several jurisdictions that have allowed our use this week, unless they reverse those decisions, which is not impossible in this environment, we have a line of sight of opening stores that would take us over 100 actually this week,” Jenkins said during the company’s ICR presentation. “That little over 100 number is based on what we know right now. That leaves us really with California and New York; largely those are the two states that we need to get open.”
The eatertainment brand reported preliminary revenue of $69.4 million through the first nine weeks of its Q4, which reflects a 75 percent plummet in same-store sales. Based on those results, the company is projecting total Q4 revenues of between $98 million and $102 million, which would be at least a 70 percent drop compared to 2020.
In October, 80 brands achieved positive store-level EBITDA. That figure dropped to 54 in November, and slightly rose to 56 in December.
THE COVID-19 ROAD FOR DAVE & BUSTER'S SO FAR:
Dave & Buster’s is also swinging an EBITDA loss of $22 million thus far, and a weekly cash burn rate of $3.7 million. As of January 3, the brand had approximately $12 million in cash and $277 million available under its revolving credit agreement, net of a $150 minimum liquidity covenant, and $10 million in letters of credit.
“Over the past two weeks, we have seen an improving trend in comp sales relative to the December performance,” Jenkins said during the company’s ICR presentation. “So we are extremely encouraged by the resiliency of our brand and really a proven ability as demonstrated here—an ability to bounce back. There is clearly demand for a D&B experience, and we are extremely optimistic about our sales prospects as we head into 2021.”
Amid the pandemic, Dave & Buster’s has tried to reinvent itself with an “Inspired American Kitchen” theme that features a reduced menu of enhanced flavors and quality ingredients. The brand is also integrating tablets, kiosks, and a mobile ordering into its system to simplify operations for both employees and customers.
To attract additional revenue, Dave & Buster’s launched third-party delivery in November through DoorDash and Uber Eats. The chain also has ghost kitchens in a number of stores and is working on a virtual wings concept. Jenkins said the company views the off-premises measures as low risk to any type of cannibalization to the existing business. He added that Dave & Buster’s has the appropriate kitchen assets to “pretty much make anything.”
He did want to temper expectations, noting that Dave & Buster’s doesn’t have unit density like Chili’s, which launched It’s Just Wings this summer in more than 1,000 stores and expects $150 million in annual returns. For Dave & Buster’s, it’s simply an exploratory mission, and so the chain doesn’t anticipate a similar level of potential.
“We’re viewed primarily as an entertainment brand, we understand that, we know that, but we do view delivery and ghost kitchens as a business that could be largely incremental for us,” Jenkins said. “ … In our view, this is a business that has very low barriers to entry. It’s not expensive to explore for us from a technology standpoint.”