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Dave & Buster's same-store sales decline for the 14th consecutive quarter

In our July article, we discussed Dave & Buster's ongoing sales decline and management's long list of explanations. The company's latest results provide further evidence that its problems go beyond management's claims about weather, the economy, and other short-term headwinds.

Dave & Buster's reported that same-store sales declined 2.9% in its second quarter, which ended on August 4. That marked the company's 14th consecutive quarter of same-store sales declines.

The cumulative same-store decline is substantial. Compared with Q2 FY2023, same-store sales are down about 12% before inflation and 19% after adjusting for inflation. Compared with Q2 FY2022, before the downturn began, they are down 17% before inflation and 27% after inflation.

Dave & Buster's food-and-beverage same-store sales rose 7.6% in the latest quarter, marking five consecutive quarters of growth. The gains appear to be driven by more gaming guests choosing to eat, including the Eat & Play Combo, which offers a $4.99 entree with a $10 gaming pass purchase, kiosk ordering, and a revamped menu that restored popular dishes and more substantial entrées. The previous menu had leaned heavily on appetizers and shared plates while removing higher-revenue entrées. Management attributes the stronger results largely to increased ordering rather than price increases. Outside food reviewers have also praised the menu's improved quality and variety. The results reveal that the company's broader weakness is concentrated in its entertainment offerings. Between Q2 FY2024 and Q2 FY2026, food and beverage increased from 32.6% to 38.9% of total revenue, while entertainment declined from 67.4% to 61.1%.

Better food is driving increased spending among guests already in the building, but it has not reversed the overall sales decline. Entertainment, historically D&B's primary attraction and highest-margin revenue source, remains the weakest link.

A significant factor behind D&B's decline in same-store sales is its waning repeat appeal. Following the current Q2 report, management said customers typically visit fewer than twice a year. This is likely due to consumers' novelty-seeking behavior and the growing array of out-of-home leisure and entertainment options. PGAV Destinations research has found that “visitors are increasingly drawn to new experiences, prioritizing exploration and discovery over revisiting familiar destinations.” The eatertainment segment, once dominated by Dave & Buster's, now includes concepts offering everything from golf and darts to simulator auto racing, pickleball, and scavenger hunts. D&B faces a growing field of specialized social eatertainment, competitive socializing, and social-game venues that target adults ages 21 to 45, the same group that accounts for 65% of D&B's customer base. Outside analysts have pointed to competing entertainment venues as a contributor to Dave & Buster's same-store sales decline, a phenomenon that could be called competitive encroachment. 

We believe a decline in repeat appeal is a major contributor to D&B's same-store sales decline. Consumers increasingly seek novel out-of-home experiences and can choose from a growing number of leisure and entertainment options to satisfy that desire. For many consumers, D&B may feel like a “been there, done that” experience: Why return when there are so many new options to try?

Programming is one way to boost repeat appeal. As we have written previously, rotating events and activities can give customers a new reason to visit. D&B reported double-digit sales growth during activated World Cup matches, suggesting that well-executed programming can drive incremental sales. The program combined watch parties, themed food, soccer-related games, prizes, and ticketed events, including a final-watch package featuring unlimited wings, fries, and gameplay.

We also believe the traditional D&B and Main Event formulas are becoming obsolete. Separating the game room from the restaurant no longer aligns with younger adults' preference for venues where food, drinks, and gaming occur simultaneously in a single social environment. Many arcade games are designed for individual play, and others offer limited social interaction. Adults, including parents visiting with children, increasingly favor adult-oriented LBEs over explicitly family-oriented concepts such as Main Event.

Dave & Buster's says its new back-to-basics strategy, including new games, remodels, and an improved value proposition, will restore traffic and sales. Food-and-beverage growth indicates that parts of the strategy are working. However, over three years of consecutive quarters of declining same-store sales, most recently attributable to entertainment, cannot reasonably be explained by temporary conditions. The company still has a lot of work ahead to improve its entertainment experience and offer enough novelty, relevance, and value to give customers a compelling reason to return.

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