Dave & Buster’s Entertainment, Inc. PLAY recently announced a multi-country, multi-unit deal partnership with Abdul Mohsen Al Hokair Holding Group to develop 11 Dave & Buster’s brand units across key West Asian Markets. This includes sites in the Kingdom of Saudi Arabia, the United Arab Emirates and Egypt. Following the announcement, shares of the company increased 2.8% during trading hours on Sep 14.
To support the international expansion, the company emphasized on creating a customizable footprint to drive box economics (in each market), global marketing programs (demographically agnostic and locally executable) and differentiated amusement strategy and packages. Also, it remains focused on menu localization and a dynamic pricing model to support global market penetration.
Chief International Development Officer of Dave & Buster’s, Antonio Bautista, stated, “With four decades of market leading experience, a seasoned leadership team, and a best-in-class support center infrastructure, Dave & Buster’s is ready to RUN THE FUN for our global partners and guests.”
Focus on Unit Expansion
Dave & Buster's continues to pursue a disciplined new store growth strategy in new and existing markets to drive growth. In the first quarter of fiscal 2022, the company opened one new store in Sioux Falls, SD. Moving into the fiscal second quarter, the company opened three Dave & Buster's in Brooklyn, New York, Modesto, CA and Augusta, GA, and one Main Event in Brownsville, TX. As of July 31, 2022, the company owned and operated 148 Dave & Buster stores in 41 states, Puerto Rico, one Canadian province and 49 Main Event and 3 The Summit stores (collectively referred to as Main Event), located in 17 states.
Management believes it can grow the concept to more than 200 units in North America over time. In addition to the growth potential in North America, management is optimistic regarding the brand’s significant appeal in certain international markets. In the second half of 2022, the company is planning to open four new Dave & Buster's branded stores and two Main Event branded stores.
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Coming to price performance, shares of Dave & Buster's have gained 2.1% in the past year against the industry's decline of 13.1%. Notably, the company is benefiting from a higher mix of amusements and a leaner operating model. This and focus on strategic initiatives, including a new menu, optimized marketing and technology investments bode well. Going forward, the company intends to expand entertainment options and broaden its appeal, thereby making way for increased visit frequency, incremental consumer spending behavior and new guest additions in the upcoming period.
However, a challenging macro environment, including inflationary pressures on labor and commodities, is a persistent headwinds. Although the company is aggressively working to mitigate inflationary pressures (with operational efficiencies and appropriate pricing actions), it anticipates the headwinds to persist over the next few quarters. Meanwhile, earnings estimates for 2022 have declined in the past 30 days, depicting analysts’ concern regarding the stock growth potential.
Zacks Rank & Key Picks
Dave & Buster’s currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Some better-ranked stocks in the Zacks Retail-Wholesale sector are Tecnoglass Inc. TGLS, Cracker Barrel Old Country Store, Inc. CBRL and Arcos Dorados Holdings Inc. ARCO.
Tecnoglass sports a Zacks Rank #1. The company has a trailing four-quarter earnings surprise of 24.4%, on average. Shares of the company have increased 25.5% in the past three months.
The Zacks Consensus Estimate for Tecnoglass 2022 sales and earnings per share (EPS) suggests growth of 28.2% and 47.7%, respectively, from the year-ago period’s levels.
Cracker Barrel carries a Zacks Rank #2 (Buy). Cracker Barrel has a long-term earnings growth of 6.9%. Shares of the company have increased 27.6% in the past three months.
The Zacks Consensus Estimate for Cracker Barrel’s 2022 sales and EPS suggests growth of 16.3% and 15.4%, respectively, from the year-ago period’s levels.
Arcos Dorados carries a Zacks Rank #2. Arcos Dorados has a long-term earnings growth of 34.4%. Shares of the company have increased 8.7% in the past three months.
The Zacks Consensus Estimate for Arcos Dorados’ 2022 sales and EPS suggests growth of 27.1% and 104.2%, respectively, from the year-ago period’s levels.
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