What happened
Dave & Buster's (PLAY 12.10%) shareholders had a great week. The in-person entertainment specialist's stock was up 12% through Thursday trading, according to data provided by S&P Global Market Intelligence. The wider market jumped nearly 3% in that time. This spike helped put the restaurant chain back ahead of the market in 2023, up 19% so far.
This week's rally came as Dave & Buster's management team outlined plans to boost profitability over the next several years.
So what
Dave & Buster's held its annual investor conference on Tuesday, and most of the presentation simply summarized already-reported data around its positive growth trends. Earlier this month, for example, the chain reported 32% higher Q1 sales, mainly thanks to the contribution from its recently acquired Main Event bowling franchise.
NASDAQ: PLAY
Key Data Points
But this week's conference also spelled out some new plans to improve annual earnings over the next few years. Executives see several ways to boost profits and sales, they said, including by raising game prices, cutting costs in the food and beverage segment, and attacking the special events niche.
The company is hoping to convince more of its customers, who on average visit the chain less than twice per year, to up their frequency of visits. Adjusted annual earnings could rise by over $100 million with this shift.
Now what
The hard part is implementing these moves in a competitive industry, so investors shouldn't get carried away with optimism about Dave & Buster's short-term prospects. The company is located in the highly discretionary in-person entertainment space, too, which is sensitive to changes in consumer spending trends. A recession would likely create intense pressure on sales and earnings trends, for example.
But the company is seeing strong growth today, both in its core business and in the newly acquired Main Event division. That merger is already contributing to earnings, as well. Continued wins in these areas could help the stock stay above the wider market in 2023 and beyond.
