Dave & Buster's Proves Consumers Remain Picky Purchasers

Shares of Dave & Buster's Entertainment, Inc. PLAY lost more than 5 percent Wednesday morning after the company's second-quarter earnings report fell short of expectations. It didn't deter some of Wall Street's analysts to part ways with their bullish stance.

Wells Fargo's Jeff Farmer maintains an Outperform rating on Dave & Buster's with a price target lowered from $78 to $71 as the earnings report contained several encouraging data points. Perhaps most important, the company's differentiated concept in offering arcades, food, drinks and other forms of entertainment all in one place contributed to market share gains.

Same-store sales for the quarter rose 1.1 percent and was composed of a 4.7 percent gain in amusement but a 3.5 percent decline in food (with 2.3 percent pricing) and a 3.3 percent decline in beverage (with 1.9 percent pricing), the analyst noted. But as was the case in prior quarters, the widening gap could be attributed to families spending simply spending more money on amusement and less on drinks or visiting at non-typical eating hours like mid-afternoon.

As such, the impact to Dave & Buster's third quarter same-store sales will likely be similar to the second quarter but with the added headwinds of Hurricane Harvey and the higher competitive openings, Farmer also noted.

The company did lower its fiscal 2017 EBITDA guidance from $276-$282 million to $270-$276 million, but the analyst remains confident that continued market share gains and best-in-class unit growth story makes the stock attractive at current levels

Image credit: Mike Mozart, Flickr