Some restaurant and entertainment chains will take some time to get back to where they were before the pandemic sucker-punched their operations, but the turnaround at Dave & Buster's Entertainment (PLAY 4.18%) is more than complete. The "eatertainment" chain that offers casual dining, sports bars, and massive high-tech video game arcades under the same roof delivered blowout financial results on Tuesday afternoon. 

Unlike retail concepts that are merely posting strong gains agains the prior fiscal year's depressed results, Dave & Buster's has made it a point to present its financials against how it fared in 2020 as well as 2019. It did so earlier this year when the two-year results were still problematic, but it has now rattled off two consecutive quarters in which its top and bottom line exceeded where it was during same period two years earlier.

A father and son playing a competitive arcade game.

Image source: Getty Images.

More treats than tricks

Dave & Buster's posted $318 million in revenue for the fiscal third quarter ending on Halloween. This is nearly triple what it posted during last year's challenging quarter and a respectable 6% higher than where it landed in the fiscal third quarter of 2019. Analysts were holding out for $319.8 million in revenue, but that was the only pressure point in an otherwise great report. 

Comps rose 1.1% relative to where the unit-level performance was for the same period two years ago, as long as you exclude the seven Dave & Buster's in locations where vaccine mandates are legally in place. Bake those into the mix and comps would be down 0.4%. 

The bottom line is where the news gets really encouraging. Net income of $0.21 a share for the fiscal quarter is well ahead of both the huge loss posted a year ago as well as the $0.02-a-share profit squeezed out in 2019. Analysts were banking on net income of only $0.12 a share, but that's been par for the golf simulator course this fiscal year. Dave & Buster's has beaten Wall Street's profit targets by 350%, 85%, and 75% through this year's first three fiscal quarters, respectively. 

Momentum is strong heading into the holiday-padded current quarter. Comps have risen 3.5% through the first five weeks of the fiscal fourth quarter. Special events traffic continues to be a drag as companies and conferences hold off on in-person social gatherings, but walk-in sales are 14% higher than they were two years ago. Just imagine how much better things can get once the chain's special events business picks back up.

The timing of the holidays this year -- with the Christmas and New Year's holidays taking place over the weekend -- will eat into its performance, but it still sees positive two-year comps for the third consecutive quarter. Despite the inflationary pressures facing the industry, Dave & Buster's once again expects to report stronger adjusted margins than it did in 2019. 

Dave & Buster's is also eating its own cooking. It's been buying back some of its debt, and the board just authorized $100 million in stock buybacks. There may be some uncertainty over the surprise retirement announcement of CEO Brian Jenkins in September, but it doesn't seem as if Dave & Buster's is fumbling the ball in transition. It continues to seek his replacement, with the board chair serving as the interim CEO.

The pandemic lull appears to have made Dave & Buster's a better business. It has had time to update its operations, and it's even made itself trendy now by offering collectible non-fungible token (NFT) prizes beyond its old-school fare of redemption awards. Dave & Buster's is playing the game well, but that's probably what you would expect from a superstore entertainment concept in which most of the square footage is dedicated to its lively video game arcade.