Shares of restaurant and amusement chain Dave & Buster's Entertainment (NASDAQ:PLAY) plunged another 45.7% in trading Monday as everyone from health officials to President Trump told people to stay out of restaurants and bars. Shares moved steadily lower all day.
There wasn't any specific news about Dave & Buster's today, and that might be part of the problem. Management isn't shutting down stores and hasn't addressed how it's going to manage the coronavirus outbreak that's hitting the nation.
Meanwhile, major cities are going on lockdown, and health officials are warning people to avoid bars and restaurants. When it comes to staying away from common surfaces people touch, Dave & Buster's would be one of the first places I would avoid, and investors seem to think that will be the case for the public.
The problem for restaurants and amusement locations is that consumer discretionary spending is the first to go in a crisis. So they could see revenue drop by as much as 100% for weeks on end. Meanwhile, fixed operating costs like rent, operating payroll, and general and administrative costs are difficult to reduce short term, so expenses will be piling up.
Restaurants are going to be in a lot of trouble if the coronavirus outbreak lasts long, and that's bad news for Dave & Buster's. Right now, I don't think the sell-off is done and would wait to see how long it lasts before thinking about jumping into a high-risk stock like this.