The chain's stock plunged Monday following a lowered fiscal outlook for the year.

Dave & Buster’s expected its sales to improve during December, a typically strong season for the eat-and-play brand. The opposite happened. In response, Dave & Buster’s lowered its fiscal 2017 guidance, and Wall Street hammered the 105-unit chain because of it. Shares plummeted more than 22 percent Monday to $43.79.

Dave & Buster’s said it now expects fiscal 2017 total revenue to be in the range of $1.138–$1.142 billion, down from $1.148–$1.155 billion previously forecasted, and for same-store sales (on a 52-week basis) to decline 1 to 0.7 percent from flat to .75 percent growth. Net income is expected to be in the range of $108 million–$110 million versus prior guidance of $110 million–$112 million

The key factor: In the fourth quarter-to-date, through January 6, Dave & Buster’s comparable same-store sales are down 5.1 percent. The quarter ends February 4.

“As indicated on our fiscal third quarter conference call, we had a slower-than-expected start to the fourth quarter. We expected sales to improve during our seasonally strong weeks in December but instead trends softened further leading us to update our financial outlook for fiscal year 2017,” Steve King, chief executive officer, said in a statement.

This downward trend is proving to be an alarming one for investors. In December’s third-quarter review, Dave & Buster’s comps dropped into the red for the first time since the chain went public in 2014. Same-store sales fell 1.3 percent, year-over-year, while total revenues increased 9.3 percent to $250 million from $228.7 million. Broken down, sales in amusements increased 1.1 percent, while food and beverage declined 4.2 percent. This would hint at a couple of possible issues for Dave & Buster’s. Is the “eatertainment” chain being squeezed by its competition and additional restaurant openings? Brands like Topgolf and Main Event have saturated the space. Back in September, this dynamic seemed to be gaining steam. Executives said during a conference call that Dallas-based Main Event, which touts an “Eat. Bowl. Play” model opened five units in Dave & Buster’s corridor. Two Topgolfs debuted as well.

“We are watching the competitors closely in terms of when we think they’re going to open and trying to measure the magnitude of that opening, but it’s not always totally clear,” Brian Jenkins, Dave & Buster’s CFO, said in the call.

And Dave & Buster’s is still growing—14 restaurants in 2017, or 15 percent unit growth. Six of those stores were in markets where the company already has stores. Meanwhile, many casual dining chains are either retracting or halting growth. Applebee’s closed triple-digit stores in fiscal 2017 and Red Robin recently announced it would stop growing after this year. Dave & Buster’s currently has 11 stores under construction and a total of 27 signed leases. The company said it plans to open 14–15 new units in 2018, including the debut of a smaller format (15,00–20,000 square-foot store in Arkansas) that could trigger future expansion in previously underserved markets.

“Meanwhile, our new stores continue to perform very well,” King added in a statement Monday. “Opening new stores with outstanding returns remains a key priority and we are maintaining our plan to open 14 to 15 new stores in fiscal 2018. With their first year now completed, we are pleased to report year-one cash on cash returns of approximately 54 percent for our 2016 class of stores, exceeding returns for our very successful 2014 and 2015 classes of stores.”

Dave & Buster’s is presenting at the 20th Annual ICR Conference in Orlando Tuesday and could provide some turnaround details. This news could pop the brand’s stock depending on what the company outlines and how it’s received.

In the third quarter, in addition to the new format, Dave & Buster’s mentioned a few initiatives that would be coming down the pipe. These included a continuously improving games lineup, an incoming proprietary virtual reality platform, and plans to reignite its food and beverage business by improving product alignment and speed of service. The company also wants to “remove friction in the guest experience,” and, bolstered by strong new store returns, drive unit growth for the company in the long term.

Dave & Buster’s plans to emphasize its Eat & Play combo, which was advertised on TV during the quarter. A menu redesign and simplification in the kitchen will boost speed.

Also, technology, such as pay-at-the-table and mobile pay, are being tested.

Kings said Dave & Buster’s is looking at offering a quick casual alterative delivery mechanism inside restaurants as well. The company will begin testing the platform in 2018.

Casual Dining, Chain Restaurants, Feature, Finance, Dave & Buster's