Join Hedgeye Restaurants analyst Howard Penney as he hosts an updated presentation on short ideas Dave & Buster's Entertainment (PLAY) and Papa John's International (PZZA) today at 11 AM EST.
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Dave & Buster's Entertainment (PLAY)
When the Hedgeye Restaurants Team most-recently presented our SHORT thesis on Dave & Buster's (PLAY) 11 months ago, they had admittedly underestimated the Company's ability to buttress itself from competitive intrusion. However, one facet of their SHORT thesis that still gives them confidence on the TAIL call is their belief that the Company's discretionary games business will slow.
Just like other companies in the Casual Dining space, PLAY has seen beverage and foods comps slow dramatically, leaving its amusement business as the lone portion of the business posting respectable comps. However, when considering PLAY's Amusement & Other SSS on a two-year average, the metric has decelerated by nearly 450bps from 3Q16 to 1Q17.
During this presentation, they will give an overview of key components of their thinking as they continue to formulate their short thesis. Going forward it will be keen to keep a close eye on PLAY as macro headwinds, namely increasingly high chicken wing prices, will shrink margins and the convenience offered by delivery will continue to pull consumer wallets in different directions.
Papa John's International (PZZA)
On the heels of their recent DPZ Black Book, in which they laid out the thesis that DPZ's business will slow domestically as other players continue to flood the deliver space, they have decided to add PZZA to the mix, as well. If DPZ's international business is any indication, as the U.S. delivery space continues to mature, pizza players, who have historically had a strangle-hold on the space, will lose steam as consumers will have literally anything and everything available at their fingertips.
PZZA's same-store sales have seen a noticeable decline, as North America SSS has seen a sequential decline of 180bps from 4Q16-1Q17 and a decline of 60bps from 1Q17-2Q17. Additionally, on the two-year average, PZZA's international SSS saw a 130bps sequential decline, and on a two-year stack basis, there was a 250bps sequential decline. The Team will dive deeper during the course of their presentation and lay out why they believe the overall pizza space is up for a rude awakening.
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