What happened
Dave & Buster's Entertainment (PLAY 6.74%) shareholders beat a rallying market last month. Their stock gained 18% in March compared to a 4.2% rise in the S&P 500, according to data provided by S&P Global Market Intelligence.
The rally added to huge gains in the restaurant specialist's shares following a slump as markets reacted to the start of the COVID-19 pandemic last March. Dave & Buster's stock has underperformed over the longer term, up just 16% in the past five years compared to a 94% increase in the wider market.
Image source: Getty Images.
So what
Enthusiasm built in March thanks to rising vaccine availability and the prospects of a sharp growth rebound for the eating and entertainment franchise. Dave & Buster's sales had been heavily influenced by the path of the COVID-19 virus, and declining case numbers last month pointed to rising customer traffic. Wall Street was also hoping to hear good news from management's late March earnings update.
Now what
Dave & Buster's did reveal some encouraging trends in its March 31 quarterly announcement. Sales declines were more modest than projected and improved toward the end of the quarter. Yet the company is still operating at far less than 50% of its normal volume.
Management predicted Dave & Buster's will return to adjusted profitability on an EBITDA basis in the first quarter after posting losses by that measure for almost a full year. From there, the chain has an uphill climb to start setting new sales and profit records in a competitive industry.
