Dave & Buster's (PLAY 1.18%) outgained a rising market on Thursday as its share price jumped 15% by 3 p.m. ET compared to a 2.2% surge in the S&P 500. That rally was enough to put the restaurant and entertainment chain back into positive territory for 2022, even as the wider market is down about 15% since early January.
Dave & Buster's stock benefited from a few earnings reports that suggested resilience on the part of consumers. In Macy's fiscal Q1 report, which it delivered before the market opened, it announced a 13% spike in comparable-store sales paired with strong profitability. The department store giant affirmed its prior sales guidance and boosted its earnings outlook, which suggests shoppers are still spending freely despite inflation and rising interest rates.
Wall Street has been worried about the possibility that a recession is on the horizon, but Macy's latest results showed no signs of such an economic pullback, and neither did those of Dollar Tree. As a consumer discretionary stock, Dave & Buster's has been sensitive to any shifts in the wider economic growth story. Thursday's earnings news helped the chain gain 15%, but Macy's and Dollar Tree both gained about 20% on that increased optimism.
For the time being, Dave & Buster's stock is likely to stay volatile as investors receive more information about the state of consumer spending. Many people these days are eager to shift more of their discretionary spending toward experiences like restaurants, and the chain's entertainment focus might make it a winner in this environment.
On the other hand, Dave & Buster's was grappling with profitability challenges through late 2021, and those issues will be harder to fix under a slow-growth scenario.
That's why investors will be looking carefully at the chain's fiscal first-quarter earnings results, due out in mid-June, for signs that the business is on a firmer footing.