Dave & Buster's Surges 47% In 6 Months: More Room To Run?

In an intensely competitive restaurant industry, Dave & Buster's Entertainment, Inc. (NASDAQ:PLAY) has done exceedingly well and emerged as an attractive investment option. This is quite evident from the stock’s performance in the past six months. Shares of the company have surged 46.9% compared with the industry’s 9.5% growth.

We believe there is still a momentum left in this Zacks Rank #2 (Buy) company. This is because the company has an expected long-term earnings growth rate of 14.8% and VGM Score of A. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Stocks such as Darden Restaurants, Inc. (NYSE:DRI) , Dunkin' Brands Group, Inc. (NASDAQ:DNKN) and Dave & Bojangles', Inc. (NASDAQ:BOJA) , which belong to the same industry, have also gained 37.7%, 10% and 4.3%, respectively, in a year’s time. Let’s delve deeper and find out the reason that kept Dave & Buster's Entertainment ahead of its peers.

Key Catalyst

Dave & Buster's is consistently delivering solid performance, courtesy of the unique customizable experience that it offers across the four platforms — “Eat, Drink, Play and Watch.” The company’s distinctive model also generates favorable store economics and solid returns. Apart from amazing food or beverages, the company’s entertainment business has been driving growth. Notably, amusement and other revenues accounted for 59.2% of total revenues in the second quarter of fiscal 2018.

Dave & Buster's continues to pursue a disciplined new store growth strategy in both new and existing markets, given the broad appeal of its brand. In the second quarter of fiscal 2018, the company opened five stores. Currently, it has eight stores under construction. Dave & Buster's plans to ride on new store growth in 2019 and early 2020 as well. In fiscal 2018, the company anticipates opening 14-15 stores, including two latest 17-K format stores — a combination of eight stores in new markets for D&B — with the remaining located in markets where the brand is already established. With these store openings, it intends to achieve a 13-14% annual unit growth rate.

These apart, the company’s robust sales building initiatives are consistently driving growth. Menu innovation is a key attribute of the brand and guests have responded favorably to it. Also, Dave & Buster's believes that it can drive traffic by enhancing in-store and out-of-store customer experience via digital and mobile strategic initiatives as well as through employing better technology. The company, thus, intends to leverage its growing loyalty database as well as continuous investment in other mobile applications for building customer connections and driving frequent customer visitation.

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