Dave & Buster's (PLAY) Comps Trend Improves, Stock Up 7%

Shares of Dave & Buster's Entertainment, Inc. PLAY surged 6.9% yesterday following the company’s announcement that comparable store sales continue to improve steadily in third-quarter 2020.

Comparable store sales, which declined 87% during second-quarter 2020, improved slightly and witnessed a decrease of 75% and 62% in August and September, respectively. At the end of August, 84 stores were open out of which 68 stores were comparable stores. Notably, 68 comparable stores performed at an index of 46% compared with 2019 level.

Moreover, at the end of September, 99 stores were open out of which 81 stores were comparable stores. The performance index of 81 comparable stores was 65% compared with 2019 levels.

Management also said that as of Oct 4, 2020, it has reopened 98 of the company’s 136 stores. Dave & Buster's has also opened one new store. As of Oct 4, 2020, the company had $197 million in cash and equivalents and nearly $744 million outstanding under its credit facility.

Brian Jenkins, Dave & Buster’s CEO said “The progress we’ve made re-opening stores and driving sales recovery demonstrates the enduring strength of the Dave & Buster’s brand and the loyalty of our guests across the country. We remain optimistic that we will emerge from this challenge in a stronger competitive position to deliver fun to our guests and value to our shareholders.”

Price Performance

Dave & Buster's is likely to benefit from increased focus in amusement business, digital initiatives, store reopening and expansion plans. In the past three months, shares of the company have gained 20.6% compared with the Zacks Retail – Restaurants industry’s growth of 16%.

Meanwhile, Dave & Buster's has been focusing on reopening stores in compliance with the state and local regulators to regain lost ground post the coronavirus-induced shutdowns. Given the size of its stores, the company is well placed to generate significant revenues despite capacity limitations and social distancing protocols.

Dave & Buster's currently carries a Zacks Rank #3 (Hold).

Key Picks

Some better-ranked stocks in the same space include Brinker International, Inc. EAT, Del Taco Restaurants, Inc. TACO and BJ's Restaurants, Inc. BJRI. While Brinker and Del Taco sport a Zacks Rank #1 (Strong Buy), BJ's Restaurants carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Brinker has a trailing four-quarter earnings surprise of 52.7%, on average.

Del Taco’s 2021 earnings are expected to surge 55%.

BJ's Restaurants has a three-five year earnings per share growth rate of 15%.

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