Today, shares of Dave & Buster's (PLAY, Financial) soared, reaching new multi-year highs, even though the company missed its Q4 (Jan) earnings and sales forecasts. This marks PLAY's fourth consecutive quarter of sales underperformance and its second earnings miss in the past year. Despite these challenges, investors are rallying behind the stock.
So, what's driving the optimism around PLAY's stock? Several factors are at play:
- PLAY's revenue growth of 6.3% year-over-year to $599.1 million and a -7.0% pro forma combined comps were significantly impacted by adverse weather, leading to full and partial store closures. This issue was not unique to PLAY, as other restaurant franchises like Brinker (EAT, Financial), Darden Restaurants (DRI, Financial), and Texas Roadhouse (TXRH, Financial) also reported similar weather-related setbacks.
- The company has shown commendable financial discipline, enhancing its Q4 adjusted EBITDA margins by 80 basis points year-over-year to 25.3%. Since 2019, PLAY has increased its margins by 380 basis points, surpassing its 200 basis point target.
Despite a rocky start to Q1 (Apr) due to calendar shifts around spring breaks and the ongoing challenge of inflation affecting costs and consumer spending, PLAY is positioning itself for success. The company is leveraging the secular shift towards experiences and services post-pandemic, focusing on improving its offerings and engaging customers through its app, which could drive future growth.
