Dave & Buster’s climbs 12% on a stronger than expected Q4 earnings report

Dave & Buster’s climbs 12% on a stronger than expected Q4 earnings report

  • Dave & Buster's generates £283.30 million in revenue in Q4 and earns 65.28 pence per share.
  • The arcade-themed restaurant chain slashed 90% of its corporate and store management staff.
  • The U.S company suspended share buybacks and dividends, and paused capital spending for 2020.

Dave & Buster’s Entertainment (NASDAQ:PLAY) released its quarterly performance results on Thursday that topped analysts’ estimates for earnings and revenue and sent the stock 12% higher in after-hours trading. The stock, however, had declined 6.1% earlier in the regular session. Closing at £8.20 per share on Thursday, the American restaurant and entertainment business was still around 75% down year to date in the stock market.

Dave & Buster’s also announced cost-cutting measures on Thursday amidst the Coronavirus pandemic that has pushed its countrywide locations into a temporary shutdown.

According to the company, it made 65.28 pence of earnings per share in the fourth quarter. At £20.40 million, its net income came significantly lower than £23.99 million that was reported in the same quarter last year.

Dave & Buster’s Slashed 90% Of Its Corporate & Store Management Staff

Dave & Buster’s revenue, however, climbed from £270.73 million last year to £283.30 million in the recent quarter. As per FactSet, analysts had anticipated the company to make 56.30 pence of earnings por share in Q4 and generate £281.10 million in revenue.

In terms of cost-cutting strategies to cushion the economic blow from the Coronavirus pandemic, the arcade-themed U.S restaurant chain placed 15,000 of its hourly employees on furlough, slashed 90% of its corporate and store management staff, and canceled board compensation for 2020. The company also announced a 50% cut on the salaries of its senior management.

Dave & Buster’s further added declared its share buybacks and dividends suspended for the year as it also paused capital spending including construction of new stores. As of March 20th, the restaurant chain has closed its 137 U.S locations and is currently negotiating with its vendors and landlords to minimize expenses.

Dave & Buster’s Is Negotiating With Private Equity Firms To Supplement Its Liquidity

To further strengthen its financial stature, Dave & Buster’s is also seeking and investment commonly termed as private investment in public equity (PIPE). Upon striking such a deal with a private equity firm, the buyout firm will get a significant stake in the American restaurant chain. In return, it will help Dave & Buster’s improve its credit facility and liquidity at large.  

Earlier in January, KKR & Co. (private equity firm) had announced its minority stake in Dave & Buster’s.

At the time of writing, Dave & Buster’s has a market value of £250.50 million and over £530.37 million worth of long-term debt.

By Wajeeh Khan
Mr. Khan specialises in Public Health by academia but is a trader by passion. Taking up two new hobbies of writing and trading in his teen years, he is now a professional trader and news writer with over 5 years of experience in various financial markets. Khan is passionate about bringing insightful articles to his readers and hopes to add value to their portfolios.

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