Dave & Buster’s Entertainment Inc. has a robust pipeline of new locations, and the restaurant-entertainment operator expects its fourth-quarter same-store sales growth to continue into fiscal 2015, executives said Tuesday.
Same-store sales for the 72-unit Dallas-based Dave & Buster’s, which went public last October, rose 10.5 percent in the fourth quarter ended Feb. 1, and new units are showing strong results, said Steve King, Dave & Buster’s CEO, in a call with analysts discussing earnings.
“We wrapped up a record-setting and milestone year following our successful IPO with a truly outstanding fourth quarter,” King said, citing record revenue and margins in the fourth quarter. “We have great momentum heading into the new year.”
Dave & Buster’s opened eight new locations in 2014, and is committed to opening seven to eight new units in 2015, with five already under construction, King said. Those will skew more to the “large-store format,” of more than 30,000 square feet. The company is already hiring for a 40,600-square-foot location to open in May in Euless, Texas.
Including the five locations under construction, the company said it has 16 other sites selected, for a pipeline of 21 units.
While it adds locations, the company is also seeing significant same-store sales gains.
Nicole Miller Regan, senior research analyst with Piper Jaffray, said in an investors’ note that Dave & Buster’s posted “better-than-expected results” for the fourth quarter, with the 10.5-percent same-store increase including “0.8 percent price and 9.7 percent traffic/mix.”
Regan said the company indicated that same-store sales trends in the first quarter were running in the 6-percent positive range.
“The company's annual same-store sales guidance of positive 3 percent to positive 4 percent is ahead of our prior expectations, and in-line with the high-end of Street expectations at positive 4.3 percent,” Regan wrote.
The brand’s modernization efforts were “reaching the majority of stores and plays a role in terms of increased beverage sales,” she added.
The D&B Sports platform, which markets the brand as a destination for watching ballgames and other events, may add to the overall sales results, Regan noted.
In his remarks to analysts, King said: “during the fourth quarter, our exceptionally strong 10.5-percent increase in comparable-store sales materially outpaced Knapp-Track by approximately 740 basis points over the same period. We've now outperformed this industry benchmark for 11 consecutive quarters.”
Dave & Buster’s positioning, with games and foodservice for all ages, provides a “differentiated guest experience that conventional casual dining and other entertainment options simply cannot provide,” he said.
Walk-in sales growth was 12.1 percent in the quarter, King said, and special events business increased 3.1 percent. Special events help Dave & Buster’s “foster more brand awareness and turn trial users into repeat customers.”
Brian Jenkins, Dave & Buster’s chief financial officer, said special events business growth was especially welcome.
“The special events, party mix in the quarter is about just shy of 16 percent of overall revenues in the fourth quarter,” Jenkins said.
In addition to promoting the D&B Sports platform, King said the company has “successfully transitioned our advertising to highlight three new exclusive games, Floppy Tickets, Kung Fu Panda and Fishbowl Frenzy.”
The company advertised on Nickelodeon around the Christmas break to appeal to a younger demographic, which he said helped generate sales during the holiday week.
“In addition, late in the quarter, we introduced a new limited edition exclusive Star Wars game which has been well received by our guests,” he said. “We anticipate that we'll continue to execute our strategy of launching new beverage and new games in conjunction with one another in periods where we're not featuring sports.”
Dave & Buster’s executives said food remained the brand’s slowest-growing category, but it still rose more than 5 percent in the quarter.
“We continue to introduce new and appealing products, as evidenced by the fact that nearly a third of our food sales come from items that we introduced between 2012 and 2014,” King said.
Dave & Buster’s has locations in 30 states and Canada.
This story has been revised to reflect the following correction:
Correction: April 16, 2015 An earlier version of this story misstated the timing of Dave & Buster's opening in Euless, Texas. The location will open in May.
Contact Ron Ruggless at [email protected].
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