What happened

Shares of Dave & Buster's (NASDAQ:PLAY) were trading higher Friday morning after the eat-and-play specialist reported fiscal first-quarter earnings and reported encouraging progress on reopening its locations. The stock was up by more than 17% early, and was up by 6.6% as of 11:45 a.m. EDT. The broad market also edged upward by more than 1% after Thursday's nearly 7% plunge.

The company's fiscal quarter ended May 3, so the numbers reflected the impact of all of its restaurants being closed for about six weeks of the period. Given that, investors were looking ahead into the recovery.

The entrance to a Dave & Buster's

Image source: Dave & Buster's.

So what

Dave & Buster's closed all of its stores on March 20 as the pandemic swept over the country, and as a result, its revenue for the first quarter fell 56.1% to $159.8 million, which was below analysts' average estimate of $167.8 million. Comparable sales were down 58.6%.

On the bottom line, the company reported a loss of $1.37 per share, which compared to a profit of $1.13 per share a year ago; analysts had expected a loss of $0.85 per share.

Dave & Buster's finished the quarter with $157 million in cash and equivalents after drawing down on its credit facility and issuing a secondary stock offering. After the quarter ended, D&B raised another $110.6 million in a private placement.

What seemed to lift the stock was that the company said it began reopening locations on April 30, and had reopened 28 restaurants across the country with limited hours and capacity, and with social distancing and enhanced cleaning protocols. By the end of this week, it expected to have 48 locations open in 15 states, or more than a third of its 137 total locations.

On the earnings call, CEO Brian Jenkins said that stores currently open generated 37% of their sales from year-ago levels over the past week, and said that all reopened stores were profitable on a variable-cost basis. Dave & Buster's stores can cover their variable costs with just 10% to 20% of their normal sales levels, a positive sign for the company's recovery.

Now what

Management had already withdrawn its guidance, but said it expected to have 90 to 95 stores opened by July and all stores opened by September, barring any further setbacks related to COVID-19. The stock is still down by two-thirds from its pre-COVID levels, so there's a lot of room for growth, but it's going to be a long recovery for the business, which is now saddled with more debt and has had to dilute shareholders to survive the crisis.