Shares of Dave & Buster’s Entertainment (NASDAQ:PLAY) were launched higher in after-hours trading on the back of a better-than-expected adjusted profit for the second quarter, overshadowing decelerating comparable store sales.
The knee-jerk reaction coupled with 13% short interest drove shares to a nearly 6-week high.
For the quarter ended August 6, the restaurant chain earned an adjusted profit of $1.12 per share, up from $0.94 per share in the year-ago quarter and $0.26 better than expected. Revenue increased 2.8% to $557.1M, but was slightly below expectations.
The gains in profitability and revenue come despite a larger-than-expected 6.3% drop in comparable sales as the company was able to effectively manage costs, evidenced by an 8.1% increase in adjusted EBITDA. Additionally, adjusted EBITDA was 27.2% of revenue versus 25.9% of revenue in Q2 2023.
“While we are disappointed in our same store sales performance during the quarter in this complex and challenging environment, we are laser focused on our medium-term goals and encouraged by the progress we are making on our initiatives,” CEO Chris Morris said.
On the balance sheet, the company generated $101.8M in cash flow during the quarter, ending with $13.1M in cash and $481M of availability under its $500M revolving credit facility.
Shares were last trading more than 8% higher in after-hours.
