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It Survived the Pandemic. Can Dave & Buster's Be a Winner Now?

Few restaurant stocks were as poorly positioned for a crisis like the COVID-19 pandemic as Dave & Buster's (NASDAQ: PLAY).

Most restaurants rely on social gatherings for some of their business, but eat-and-pay maven Dave & Buster's counts on in-store games for more than half of its revenue, and these high-touch surfaces were a no-go during the health crisis. At one point during the lockdown all of the company's stores were closed, and the company was only able to gradually reopen them with limited capacity until recently.

In this Fool Live segment, Fool.com contributor Jeremy Bowman discusses how Dave & Buster's survived the pandemic, and the challenges it faces now.

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Jeremy Bowman: On the flip side of coin, one stock that had struggled during the pandemic was Dave & Buster's. Not surprising there, this is a company that in normal times gets more than half of its business from the in-store games and amusements. I've never actually been to a Dave & Buster's personally, so maybe one of you guys can fill me in on the game experience. But so they had to close down all their stores during the lockdown. They slowly reopened with capacity restrictions and that sort of thing like we saw a lot of businesses.

Unlike Chipotle in fast food, there was really no opportunity to use a digital pivot there. I think at the low point in their quarterly results revenue was down 85 percent, so most disappeared. I think you do have to give the management credit for surviving. They laid off staff or furloughed them, got rent relief from landlords, tapped into credit lines and refinanced their debt. They sold a lot of stock. Their shares outstanding is up about 60 percent from where it was when the pandemic started. They're pretty much fully recovered now. As far as revenue, their guide for the current quarter was basically even with the results in 2019. I think you have to give them a lot of credit for that and that speaks to the demand for restaurants.

In general I do think as an investment, I'm still wary of them because they weren't doing so well pre-pandemic, they had a comparable sales decline. You know, for several years where they were underperforming or not able to deliver growth on the same-store sales front. There's just a lot of competition in the gaming arena. Topgolf is on the rise after being acquired by Callaway. There's never a shortage of digital games and other online streaming. There's a wide world of competition there. But so I think as well as with the shares outstanding, I think there's certainly some challenges from the stock perspective.

Jeremy Bowman 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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