What happened
Dave & Buster's Entertainment (PLAY +2.87%) shares outpaced a booming market in August, notching a 35% return compared to the S&P 500's 7% increase, according to data provided by S&P Global Market Intelligence.
That rally only erased a portion of the losses shareholders have seen in recent months. The restaurant and entertainment chain remains lower by over 50% so far in 2020.
Image source: Getty Images.
So what
August's rally was supported by rising investor optimism in an eventual industry rebound once the COVID-19 threat has ended. Some of Dave & Buster's best performance days last month coincided with positive news about the development of a vaccine.
Now what
Until the pandemic ends, Dave & Buster's is likely to show weak sales and profitability as consumers choose more outdoor-focused entertainment and dining options. There will be plenty of evidence of those pressures when the company reports its second-quarter earnings results on Sept. 10.
In that announcement, investors are expecting to see the chain's sales slump improve slightly as revenue declines land at 21% compared to nearly 60% last quarter. But the prospect for several additional quarters of reduced revenue will put the focus on CEO Brian Jenkins' cost-cutting plans and on the retailer's wider expansion strategy through what could be a painful recession in the restaurant industry.
