Dive Brief:
- Dave & Buster’s CEO Chris Morris resigned on Dec. 10, according to a form 8-K filed with the Securities and Exchange Commission.
- Kevin Sheehan, the chair of the board at Dave & Buster’s, will serve as interim CEO while the company searches for a permanent replacement.
- The announcement coincided with the release of the brand’s third quarter earnings report, which showed a sharp 7.7% drop in same-store sales.
Dive Insight:
William Blair analyst Sharon Zackfia said that Morris’ departure was unexpected.
“As the chief architect of Dave & Buster’s current revamp consisting of an aggressive remodel campaign alongside overhauls of the company’s marketing, menu, service model, and cost structure, Morris’s departure was a significant surprise,” Zakfia wrote in a note emailed to Restaurant Dive.
Morris joined the chain as CEO in mid-2022 from Main Event after Dave & Buster’s acquired that concept. Morris had led Main Event for about four and a half years, according to his LinkedIn bio.
Zackfia said the CEO transition throws the company’s future strategy, pace of remodels and marketing emphasis into doubt.
Sheehan said on the chain’s earnings call that its sales problems have been most acute with price-sensitive low-income consumers.
“That low-end consumer is really where we're feeling that decline, to the extent that their spend is down twice as much as the other income quintiles,” Sheehan said.
Chief Financial Officer Darin Harper said in the earnings release that a number of factors complicated the sales picture for the third quarter.
Harper attributed the sales drop in part to “fiscal calendar mismatch, adverse weather across many important regions, disruption to certain stores in our comp set as they underwent remodel construction and certain unusual items in the prior year affecting comparability.”
The 227-unit eatertainment brand saw its net losses rise from $5.2 million in Q3 2023 to $32.7 million in the most recent quarter.
Harper said its remodel program is driving a sales lift at finished stores, and that could help the eatertainment concept recoup some sales despite a deleterious macroeconomic environment.
Dave & Buster’s finished 11 remodels in the quarter and expects to have 44 completed by the end of fiscal 2024, Harper said.
“Our fully programmed remodels continue to outperform the rest of the store base,” Harper said.
Additionally, Harper expects an improvement in the brand’s special events business to bolster revenue.
The events business, which will benefit from the holidays, will also be strengthened by “the rollout of our new banquet menu and the investments we made in our in-store managers,” Harper said.
Like much of the restaurant industry, eatertainment has had a mixed year. Emerging brands, particularly baseball concepts like Batbox and Home Run Dugout, have attracted investment in their early growth efforts. Punch Bowl Social announced the acquisition of two small concepts in April, and Danny Meyer’s investment fund put $20 million into Five Iron Golf.
At the same time, Dave & Busters has seen its comparable sales fall in all three quarters, according to its earnings releases. Pinstripes, faced with its own escalating losses, recently undertook a round of corporate layoffs, while Topgolf Callaway Brands is spinning off Topgolf following disappointing sales at that concept.
