Why Dave & Buster’s Entertainment Inc (NASDAQ: PLAY) stock is crashing

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Dave & Buster’s Entertainment Inc (NASDAQ: PLAY) stock lost over 16.6% in the pre-market session of June 12th, 2019 (Source: Google finance) as the company has posted lower than expected results for the first quarter of FY 19. Adjusted EBITDA rose 2.4% to $98.2 million in the first quarter of 2019 from $95.9 million in the first quarter of 2018. Adjusted EBITDA margin contracted 190 basis points to 27.0% from 28.9%.

PLAY in the first quarter of FY 19 has reported the adjusted earnings per share of $1.13, beating the analysts’ estimates for the adjusted earnings per share of $1.15, according to the analysts polled by FactSet. The company had reported the adjusted revenue growth of 9.5 percent to $363.6 million in the first quarter of FY 19, missing the analysts’ estimates for revenue of $372 million. This growth was on back of an 11.9% increase in Amusements and Other revenue and a 6.1% rise in Food and Beverage revenue. The mix of Amusement and Other as a percentage of total revenue expanded 130 basis points to 59.2% in the first quarter of 2019 from 57.9% in last year’s first quarter.

Comparable store sales had declined0.3% in the first quarter 2019, compared to a decline of 4.9% in the comparable period last year. The company’s comparable store sales decrease was due to a 0.6% decline in walk-in sales, though special events sales were up 3.0%. Comparable store sales rose 1.8% in Amusements & Other but fell 3.3% in Food & Beverage. Non-comparable store revenues rose to $32.6 million, or 76.8%, in the first quarter 2019 to $75.0 million.

For FY 19, PLAY is on track to open 15 to 16 new locations, representing unit growth of approximately 12% (net of Gwinnett (Duluth), Georgia closing), and is consistent with the target of 10% or more annual unit growth. At the top end of the range, these store openings will include 11 large and 5 small format locations and will skew towards new markets for the brand. As of June 4, 2019, there were 8 stores under construction, one opened in the second quarter and seven was opened in the first quarter

For FY 19, PLAY expects fiscal 2019 revenue to be between $1.365 billion and $1.390 billion, versus a prior guidance of revenue between $1.370 billion and $1.400 billion, and net income to be between $103 million and $113 million for the year, compared with a previous expectation of profit between $105 million and $117 million.

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