Dave & Buster's Entertainment, a Texas-based restaurant and entertainment chain, shows how its market has changed in a year after restrictions were lifted.
Dave & Buster's Entertainment, a Texas-based restaurant and entertainment chain, shows how its market has changed in a year after restrictions were lifted and consumers decided to venture out in search of fun even as the delta variant is blamed for keeping the coronavirus spreading.
The Dallas-based chain, known for its arcade games, food and drinks, said its second-quarter revenue rose to a record $377.6 million from $50.8 million for the same quarter in 2020 and $344.6 million for the same quarter in 2019. The beginning of August marked the first time all the company's 142 stores in the United States, Canada and Puerto Rico were all open and operating after temporary closings from the coronavirus outbreak.
"We have had a single goal to emerge as a stronger, more competitive company," CEO Brian Jenkins told investors on an earnings call. "I am pleased to report we have accomplished that goal. Our brand is back and we are stronger than ever."
The arcade and restaurant brand was financially strapped last year, like many other entertainment operators, but with the help of an equity infusion, new bond offering and amended credit facility, Jenkins said Dave & Buster's was able to successfully rebuild its capital structure.
"We now have a significant flexibility to run our business and invest in our future," he said, adding the future includes rebuilding the company's new store pipeline. Dave & Buster's did not immediately respond to an interview request from CoStar News.
Before the end of this fiscal year, expected to close on Jan. 30, 2022, Dave & Buster's plans to add another store in Brooklyn, New York, making it the fourth new store in the year. Plans are already underway to add six to eight new stores in fiscal 2022, with Jenkins saying this marks a "meaningful acceleration" of the development pipeline compared to 2021.
The chain is actively working on deals filling out the development pipeline for 2023 and 2024, but executives declined to share the number of new venues they are targeting. Executives also say they are discussing the possibilities of expanding internationally, picking up a conversation put on hold during the pandemic.
"We're continuing to look at not only new properties that weren't in that mix, but some additional sites that we had on our radar pre-COVID," Jenkins said. The company is "very active now, which is a lot better position to be in when dealing with lease negotiations than we were for most of 2020 and our development team is laser-focused on building the pipeline back."
In bolstering its fleet, Dave & Buster's plans to focus on building out existing markets and bringing the company's smaller-format store to new markets. The chain's first free-standing smaller-format store in Gainesville, Florida, totaling about 18,000 square feet of entertainment space, is already generating nearly $6 million in revenue in the first half of the year.
Dave & Buster's has gone through its ups and downs in recent years, but the record quarter by the company with a history dating back to the early 1980s reflects a bigger trend seen throughout the United States by entertainment companies, said Dennis Speigel, founder and CEO of International Theme Park Services in Cincinnati, who tracks the industry.
"People are not traveling distances and staying closer to home," Speigel said in a phone interview with CoStar News, saying those staycations have taken on what he calls the pampering effect as consumers take time to treat themselves. "We are seeing this across the board in the leisure entertainment and restaurant business.
"It's the wildest thing we've ever watched across our careers, seeing the price hikes on family entertainment centers," he added. "There's been no push back because people are just happy to get out of the house."
Like its peers, Dave & Buster's didn't offer price discounts and saw a significant per capita lift in spending on the amusements part of the business of nearly 30%, Jenkins told analysts. The company did not report attendance numbers. Speigel said if the industry is any indicator, the number of guests is down, but spending per guest has increased with the help of contactless transactions relying more on credit cards.
Dave & Buster's record quarter results could be an upward blip, Speigel said, but the company's plans to build out its development pipeline make sense, even given the uncertainty in the industry, with the pandemic showing how companies should be planning for anything.
One of the biggest hurdles facing the entertainment industry, including Dave & Buster's, is finding workers. Jenkins told investors he's noticed a wage rate inflation. Speigel said wage inflation is happening industrywide, with one theme park offering would-be employees $25 per hour in hopes of filling open jobs, and he expects it to only continue.
"I think we are going to see labor shortages carry forward into 2022 and 2023," he said. "There's nothing that shows us employees are coming back."