Dave & Buster's Entertainment (NASDAQ:PLAY) reported a steeper-than-expected drop in first-quarter profit and revenue as softer consumer sentiment and a marketing misstep weighed on comparable store sales.
The video game and restaurant chain posted adjusted earnings per share of $0.22 for the quarter, falling well short of the analyst consensus of approximately $0.90.
Revenue declined 1.5% year-over-year to $559.2 million, missing the $580.6 million expected by analysts.
Comparable store sales fell 5.4% in the quarter, significantly worse than the consensus estimate of a 1.2% decline. The company attributed the shortfall to macroeconomic headwinds including elevated gas prices and geopolitical uncertainty, as well as promotional tests that failed to connect with cost-conscious consumers.
Despite the weak headline results, management pointed to early signs of stabilization. Quarter-to-date comparable sales through mid-June were running at negative 4%, and the company said it expects to return to positive comparable sales for the remainder of fiscal 2026, beginning in mid-June, driven by a new games lineup, World Cup activations and a revitalized loyalty program with personalized offers.
The company also cited momentum in its food and beverage segment, where comparable sales rose 5% year-over-year for the ninth consecutive month of positive growth, and in special events, which saw a 3% comparable sales gain.
On the operational side, Dave & Buster's reported a meaningful swing in adjusted free cash flow, improving to positive $25.3 million from negative $58.8 million in the prior year period. Management reiterated its fiscal 2026 target of generating more than $100 million in free cash flow, with approximately $499 million in total liquidity.
Dave & Buster's also reported continued international expansion, opening its fifth and sixth franchise locations in May and June 2026, including a partnership to develop 15 venues in India.
Jefferies analysts said they view risk/reward as skewed to the upside at current valuations.
The firm noted the stock trades at roughly 4 times estimated 2027 EBITDA, a discount to most full-service peers at 5 to 12 times.
The bank lowered its 2026 comparable sales estimate to negative 2.4% and cut its adjusted EBITDA forecasts for 2026 and 2027 to $433 million and $469 million, respectively.
Shares opened about 2.6% lower on Tuesday.