Dave & Buster's Entertainment shares plunged Wednesday after a decision to skip its All You Can Eat Wings promotion at the start of the football season led to disappointing same-store sales growth.
The company's stock dropped more than 12 percent Wednesday. Dave & Buster's shares were already down 17 percent so far this year, as the company has struggled as competitors mimicked its dual business model of food and entertainment. Dave & Buster's $1.8 billion market value could drop even more if it cannot adapt to the changing landscape.
"Food and beverage comp sales were unfavorably impacted by the timing of our All You Can Eat Wings promotion, as well as a decline in special events, which is a higher mix of F&B [food and beverage]," interim CFO Joseph DeProspero said on the quarterly conference call.
The Dallas-based company said it reintroduced the $19.99 offer for unlimited chicken wings once it saw the impact it was having on its sales.
Dave & Buster's did not quantify the consequence of that decision, although CEO Brian Jenkins did tell analysts it had a "meaningful negative impact." The company expects same-store sales to decrease in the low single digits for the fiscal year.
During the third quarter, sales at its locations opened at least 12 months fell 1.3 percent, wider than the loss of 0.5 percent analysts surveyed by Refinitiv had expected.
Its restaurant business, responsible for 42 percent of third-quarter revenue, saw same-store sales drop by 5 percent. In the category, both food and bar same-store sales fell about 5 percent. Dave & Buster's special events business, which can be volatile, experienced an even sharper decline of 6.9 percent.
For its amusements business, expansion into virtual reality games helped same-store sales for the division increase by 1.5 percent. However, the company did name labor for the attraction as a headwind that will continue in future quarters.
"Labor pressures should also continue moving margins lower as guidance implies," Jefferies analyst Andy Barish said in a note.
The company otherwise beat on its top and bottom lines. It earned 30 cents per share for the third quarter, higher than the analysts' expectations of 24 cents per share. Dave & Buster's also reported revenue of $282 million, beating Wall Street estimates of $278 million.
"While implied F4Q comp guidance was wider than some hoped, we continue to expect a return to positive comps beginning in F4Q," Raymond James analyst Brian Vaccaro said in a research note.
For its fiscal year, Dave & Buster's raised the lower end of its sales forecast to a range of $1.24 billion to $1.26 billion. Previously, the company said it expected sales of $1.23 billion to $1.26 billion. Net income is expected to be between $106 million and $113 million, up from a prior estimate of $101 million to $111 million.
Dave & Buster's is also projecting that the 15 stores it plans to open next year will not produce the same average unit volume as its existing ones, which could mean lower same-store sales further down the line.