Why Dave & Buster’s Latest Quarterly Earnings Report May Spook Investors

The past success of Dave & Buster’s proves that guests gravitate to restaurants that offer an array of entertainment outlets. With huge arcade rooms, pool tables, huge screen TVs, and much more ­–  Dave & Buster’s is so much more than a place to get some grub. 

While other restaurant chains have struggled significantly in the last two years, this brand has been able to maintain comparable-store sales growth. The company’s most profitable revenue stream is what it makes from the games guests play while eating at the stores.

However, in its most recent second-quarter earnings report, it shows that the company has continued to grow but at a much slower rate. While the report showed impressive gross margins from its games and amusement offerings and that the company’s income tax rate has been cut in half due to an accounting improvement, the growth rate is less than it has been in the last few years. 

“The former lends itself to long-term strength that investors should get excited about. The latter, however, is a one-off benefit that doesn't indicate enduring leverage. Indeed, if this year's tax rate had been the same as it was last year, earnings would have come in at just $0.59 per share, showing more modest growth of 18%,” writes “The Motley Fool.”

And this slower growth trend is expected to continue for the rest of the year.

So, why the slow down? Steve King, CEO of Dave and Buster’s points out a few things.

“One, a casual dining environment that seems to have been progressively worse over the course of the summer... [Two], the competitive openings ... [were] modestly higher than we expected,” said King.  “And then, I think the unknown here is ... the impact related to Hurricane Harvey which we were shut down for a full week, and we're back open but not at full strength..” 

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