Why Dave & Buster's Stock Popped on Wednesday

Shareholders of this playful business are having a good time.

Shares of entertainment restaurant company Dave & Buster’s (PLAY 10.30%) popped on Wednesday after the company released financial results for the fourth quarter of 2023. As of 2:30 p.m. ET, Dave & Buster’s stock was up 11% and hitting 52-week highs.

A strong year for Dave & Buster’s

The fiscal year for Dave & Buster’s ended on Feb. 4. And it was largely a good year. Revenue was up 12% year over year to $2.2 billion, and it had net income of $127 million. While net income did take a step back from net income of $137 million in fiscal 2023, fiscal 2024 results still represent a respectable 5.8% profit margin.

Dave & Buster’s also made critical headway with its outstanding share count. For context, this company was one of the worst-hit restaurant companies during the COVID-19 pandemic because its locations are designed to be experienced in person. As its income ground to a halt, management had to issue new shares to stay afloat. From the end of fiscal 2019 through the end of fiscal 2021, the outstanding share count for Dave & Buster’s grew by 44% — that’s some serious shareholder dilution.

However, in fiscal 2023, management for Dave & Buster’s repurchased 8.5 million shares, dropping the share count by nearly 18%. And the company is authorized to repurchase $200 million in stock right now, representing another 7% of shares outstanding. Therefore, it seems shareholders are encouraged that they’re being rewarded now that the business has recovered.

One metric to watch

Management for Dave & Buster’s doesn’t give financial guidance. But one thing to watch is the company’s same-store sales. The business is composed of its eponymous brand as well as the Main Event brand. And together, same-store sales for these two dropped by 6% in fiscal 2023, with a larger 7% drop coming in the fourth quarter.

Sales for Dave & Buster’s have been trending the wrong way recently, which is an issue as it looks to open new locations. Still, it’s a small thing to watch for an otherwise healthy business. And if the company keeps earning profits and giving back to shareholders at its current pace, there could be more upside ahead for shareholders.

Jon Quast has no position in any of the stocks mentioned. The Motley Fool recommends Dave & Buster’s Entertainment. The Motley Fool has a disclosure policy.

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