Adjusted EBITDA in Q4 was $87.7 million, or 12.7 percent higher than 2019. The equates to a 25.5 percent margin, which was more than 300 basis points higher compared to two years ago.
Two key factors helped offset 20 percent labor inflation. For one, amusement, which doesn’t require as much labor, mixed 65 percent in the quarter compared to 56 percent in 2019. The second reason is the chain’s new model in which dine-in customers can order through xDine, an integrated online ordering platform. The solution increases the number of tables one server can handle by roughly 33 percent, meaning fewer bodies and higher pay.
For commodities, Dave & Buster’s is seeing rising costs around meat, and the chain mitigated those increases with pricing of 5 percent. Quartieri views this menu price inflation as reasonable compared to what the brand has seen in the market, especially since it didn’t take any price prior to fiscal 2020 and 2021.
With COVID receding in February and March, comps rose 5.4 percent versus 2019 in the first eight weeks of the first quarter. Walk-in business is up 9.1 percent quarter-to-date versus pre-pandemic times and special events business is down 42 percent, but that’s a stark improvement from the 58 percent drop it witnessed in Q4.
“So you can really fully understand that other than the Omicron, this business is on fire,” Sheehan said. “And it's just the beginning of it. We've got so many things that we've talked about on other calls that we're starting to shape to drive demand.”
The brand ended fiscal 2021 with 144 units, including five openings. Internal studies and third-party research shows the brand has room for 230 locations throughout the U.S. and Canada, according to the company’s SEC filing.
In 2022, Dave & Buster’s plans to open eight stores that will each hover around 25,00 square feet, but Quartieri said there will be some opportunities to enter spaces larger than that. As the company navigates past those store openings, the brand will leverage a development pipeline that takes it through the end of 2024.
Dave & Buster’s uses three basic store formats: large (between 30,001 and 45,000 square feet), medium (between 25,001 and 30,000 square feet), and small (below 25,001 square feet). As of January 30, it operated 112 large format stores, 21 medium, and 11 small.
“It's really about what the location allows for, as opposed to, we're only going with a set target and that's it,” Quartieri said. “So we have some flexibility around that and that's what the plan is for these eight stores coming this year."
The brand will also begin a formal remodel program to bring its legacy stores in line with its latest prototype. Sheehan said it will take two to three years to get through all the locations, but once that’s complete, the footprint will remain on a seven-year refresh cycle.
Dave & Buster’s will spend $200 million in capital additions in fiscal 2022, with 70 percent going to new stores and improvements to existing units, 10 percent for games, and 20 percent for infrastructure upgrades and replacements.