DAB--important article from Dallas:
Dave & Buster's shares tumble 45%
Stock closes as one of day's big losers after projections of lower earnings
08/28/99
By Dianne Solis / The Dallas Morning News
Shares of Dallas-based Dave & Buster's Inc. dropped 45 percent Friday, in tandem with news that the restaurant operator's earnings are expected to be down from a year ago.
Dave & Buster's stock plunged $11.13 to close at $13.75 a share. The stock was one of the biggest losers of the day in U.S. trading.
"The market is not forgiving anymore," said Bill Baldwin, an analyst with the Baldwin, Anthony & McIntyre brokerage in Dallas. "The earnings estimate was cut in half, and that is about what happened to the stock price."
The 21-unit restaurant chain lowered its second-quarter profit forecast to 14 cents from 16 cents a share.
It was expected to earn 28 cents, according to the average estimate of analysts polled by Boston-based First Call Corp.
A year ago, Dave & Buster's earned 21 cents a share. Second-quarter results are expected to be reported Sept. 9.
On Friday, five of eight brokerages that follow Dave & Buster's said they were downgrading their recommendations on Dave & Buster's stock, First Call said.
"We were surprised by the overreaction. ...particularly in light of the fact that we have never missed our number estimates before," said James "Buster" Corley, Dave & Buster's co-founder and chairman.
Mr. Corley noted that the company still expects to grow 30 percent next year and will be adding two more restaurants before the current fiscal year ends on Jan. 30.
Dave & Buster's blamed the weaker results on its three Southern California restaurants, which opened in 1997 and 1998. Net profits were also hurt by mild summer weather, the company said.
Dave & Buster's changed its California management, and the company said it instituted a plan to control costs.
"The California stores are doing well," Mr. Corley said. "They are just not doing as well as we forecast."
And every restaurant, Mr. Corley noted, has a positive cash flow.
Dave & Buster's got its start in 1982 in Dallas with restaurants that combined food with entertainment, ranging from shuffleboard and pocket billiards to the latest in video games.
Although certain theme restaurants have fallen in popularity among fickle consumers, some analysts said they thought the Dave & Buster's business plan was still a strong one.
"I don't think the estimates are a result of a weakness in the concept," said Michael G. Mueller, a San Francisco analyst with Banc of America Securities who kept his buy recommendation on the stock.
"They are continually updating the games, and they update the menu on a regular basis."
Source: dallasmorningnews.com |
