Dave & Buster's Did What Buffalo Wild Wings Failed To Do

| About: Dave & (PLAY)


PLAY reported fiscal Q1 results.

The results show progress in the company’s goal of becoming the “premier” sports-watching destination.

PLAY is making some smart strategic moves that may not be profitable immediately but may threaten some of BWLD’s sports dominance.

I believe CEO Sally Smith of Buffalo Wild Wings (NASDAQ:BWLD) dropped the ball big time when she refused to air the Mayweather/Pacquiao fight. Her logic was that it was on a Saturday night when the average BWLD has a wait anywhere so adding the fight will cost the company a lot of money but can't possibly add much in the way of business when the typical location is already operating at capacity. I disagree.

Dave & Buster's (NASDAQ:PLAY) has it right. During the most recent conference call, CEO Steve King stated,

"Note that while we feature the Mayweather/Pacquiao boxing match on May 2nd across nearly all stores. It did not have a significant impact on our business, despite that we think that the investment in this content was important as a brand building mechanism that helps solidify our position as the premier place to watch destinations viewing sports."

Probably the two biggest competitors for sports watching are BWLD and PLAY. I had been thinking for a while that BWLD was sacrificing long-term image for short term profit. Guests shouldn't have to call to find out if there will be a major sporting event at BWLD - they should automatically and safely assume it is like they are starting to do with PLAY.

Sure, BWLD is a wing house and sports bar while PLAY is a video game and table game sports bar, but they both compete for the sports enthusiast's business and try to lure him or her in with craft beer and delicious bar food. According to BWLD's conference call, the fight cost about $5,100 per restaurant.

Pricey? Sure, but it seems like a worthwhile investment that BWLD should have made to defend its position. I'm sure some of it would have come back to them, and it would have avoided having any disappointed customers who were expecting to see the fight. BWLD likewise didn't have the men's world cup tournament playing on its screens either.

PLAY's strategy seems to be paying off. Though both chains have been around since 1982 coincidently, PLAY seems to be growing very fast and may be taking a piece of BWLD's business. I should note that BWLD has over 1,000 locations and PLAY has still less than 100 so I'm certain whatever threat is only in local areas where the two have locations in proximity to each other, but I'm also certain BWLD doesn't like to lose even a little business to anybody.

Last quarter PLAY showed a same-store sales jump of 9.9% compared to BWLD's 7.0% for company-owned stores and 6.0% for franchisees and that's off of a much bigger base-per-restaurant for PLAY of more than three-times that of the average BWLD. A big portion of PLAY's revenue is gaming of course, but food and bar business is growing rapidly as well. For each dollar spent by a sports watcher at the bar, it's potentially one less dollar spent at a BWLD.

PLAY trades with a P/E of about 35 based on analyst estimates for this fiscal year and a stock price of $33.25 as of this writing. This compares to BWLD with a P/E of 26 using the same criteria. I wouldn't be surprised if PLAY proves analysts' estimates to be too conservative, and I like the possible opportunity with PLAY better than BWLD, but I'm first going to wait and see if the stock price drifts down a bit cheaper first.

Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.

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