What Happened in the Stock Market Today

Image source: Getty Images.

Stocks posted strong gains on Wednesday, with both the Dow Jones Industrial Average (^DJI 0.46%) and the S&P 500 (^GSPC 1.01%) indexes finishing higher by over 1% to set fresh records.

Today's stock market

Data source: Yahoo! Finance.

Gold prices rose as the dollar declined, which helped produce a 4% gain for the Daily Gold Miners Bull 3X ETF (NUGT 2.36%). The bank-heavy Financial Sector ETF (XLF 0.54%) booked another 2% increase to push its one-month return to 17%.

Dave & Buster's (PLAY 1.69%) and Vera Bradley (VRA 2.33%) were two of the biggest individual stock movers following the companies' third-quarter earnings reports.

Dave & Buster's fun quarter

Dave & Buster's stock soared by 18% after the company posted surprisingly strong third-quarter results. Following two consecutive quarters of decelerating sales gains, the restaurant chain bounced right back over the summer months as comparable-store sales improved to a 6% growth pace from 1%. Executives credited higher customer traffic, both for walk-in business and for special events.

Image source: Dave & Buster's.

In even better news for investors, the sales growth was heavily tilted toward the amusement side of the business, which carries higher profit margins. As a result, the company enjoyed its best profitability showing of the year. Operating income surged to 8% of sales from 5% last year, which helped earnings more than double to $0.25 per share. 

In response to the improving operating trends, CEO Steve King and his executive team raised their sales and profit forecasts for the year. "Our strength was broad-based as we experienced momentum across the country and throughout the quarter," King said in a press release.

The company also boosted its outlook for store expansion, saying it now aims to open 11 locations this year to bring its total footprint to roughly 100. Dave & Buster's sees room for 200 of its restaurant/gaming complexes over time, and it believes it can take advantage of falling real estate rents at malls to aggressively expand toward that long-term goal at attractive prices.

Vera Bradley's weak outlook

Vera Bradley shares fell 12% following quarterly results from the clothing retailer that showed little evidence of a coming rebound in revenue or profit growth. Comparable-store sales fell 5% at stores and declined by 4% in the online business, representing essentially no improvement over the prior quarter despite the company's brand reboot.

Image source: Getty Images.

Earnings took a hit as well, with gross profit margin weighing in below management's forecast due to a higher-than-expected level of promotions. "Recovery is a long process," CEO Robert Wallstrom said in a press release. "But we believe our focus on evolving our product offerings, while honoring our heritage; working to distribute our products in the most impactful channels; and enhancing consumer engagement and traffic through our marketing and rebranding efforts are the right ones for the future of the company."

Those efforts aren't likely to bear fruit in the critical holiday quarter, though. Executives said a weak start to the season implies sales declines will be significant, with revenue falling to $137 million from $154 million. Profits will likely slump, too, as price cuts continue to hurt the bottom line.

All told, management sees a challenging fourth quarter leading to a 3% drop in revenue for the full year as earnings slip by 22%. Given the worsening operating trends, it's no surprise that investors sent Vera Bradley's shares sharply lower on Wednesday.