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Why Dave & Buster's Stock Rallied Today

What happened

Shares of Dave & Buster's Entertainment (NASDAQ: PLAY) climbed on Friday following the release of the restaurant chain's second-quarter results. As of 1:55 p.m. EDT, the stock's price was up 3.6% after rising as much as 15.9% earlier in the day.

So what

Dave & Buster's sales rebounded sharply from their lows during the early stages of the COVID-19 crisis when it was forced to close its stores due to social distancing guidelines. In all, revenue soared 642.9% to $377.6 million.

Notably, Dave & Buster's revenue was also up 9.6% when compared to its pre-pandemic results in Q2 2019, driven in part by a 3.6% rise in comparable-store sales.

People are returning to Dave & Buster's arcades. Image source: Getty Images.

Dave & Buster's profits also recovered. It generated earnings before interest, taxes, depreciation, and amortization (EBITDA) of $114 million, compared with a loss of $46 million in the year-ago quarter and $79 million in Q2 2019.

"Dave & Buster's second quarter was clear evidence that the brand is back, posting record revenues and EBITDA with all 142 stores open as of the end of the quarter," CEO Brian Jenkins said in a press release.

Now what

These solid results, combined with the company's $121 million in operating cash flow during the quarter, prompted management to pay down $55 million, or 10%, of Dave & Buster's long-term debt. The restaurant chain also plans to open four new stores in fiscal 2021.

"Through continued execution of our strategic initiatives, including our new menu, optimized marketing, and technology investments, we are excited to move forward with a strong foundation to drive sustained profitable growth," Jenkins said.

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Joe Tenebruso has no position in any of the stocks mentioned. The Motley Fool recommends Dave & Busters Entertainment. The Motley Fool has a disclosure policy.


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