Hedgeye's Restaurants Team, led by Sector Head Howard Penney, will be hosting a Black Book today (at 11am ET) to update their SHORT thesis on Dave & Buster's Entertainment (PLAY).
"Competitive intrusion," words seldom used by PLAY's management team, were first mentioned during their 1Q16 call one time, and then three times in their 2Q16 call. During the 2Q16 call Steve King, PLAY's CEO also mentioned, "there is more of that competitive intrusion coming that will affect our fourth quarter." PLAY is no longer the only game in town when it comes to big venues to go enjoy games and grab a bite to eat.
PLAY is facing competitive intrusions in key markets, including Texas. Other markets are also getting hit by differentiated concepts that provide a fun atmosphere with the availability of food.
KEY DISCUSSION POINTS
- Competitive intrusions intensifying
- Superior competition moving in on PLAY's territory
- PLAY losing managerial talent to the competition
- Food & Beverage sales decelerating, and will drag the rest of the business down with it
- Discretionary games business will suffer, the margin tailwind is behind them
- Excessive unit growth
- Downside: 25-30%
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