Restaurants

Dave & Buster's shares crater on slashed 2017 forecast after weak December

Key Points
  • Dave & Buster's slashed its sales and profit estimates on Monday, citing a weaker-than-expected December at its arcade and sports bars.
  • The company also cut its same-store sales estimates for fiscal 2017.
  • CEO Steve King said he remains confident in the company's unit growth plans.
Customers play a car racing arcade game at a Dave & Buster's Entertainment location.
Timothy Fadek | Bloomberg | Getty Images

Shares of fell more than 17 percent early Monday after the company cut its sales and profit outlook for 2017.

CEO Steve King said the company had expected a slow start to the fourth quarter but foresaw sales improving in December. However, sales did not improve during this traditionally strong season for the brand, and the company slashed its estimates for fiscal 2017.

The company now expects net income to be between $108 million and $110 million for 2017, down from its previous guidance of $110 million to $112 million.

It said revenue should now be in a range of $1.138 billion to $1.142 billion, down from its prior outlook of $1.148 billion to $1.155 billion. The company also sliced its same-store sales estimates to a range of down 1 to 0.7 percent, compared with the flat to up 0.75 percent it had previously forecast.

While sales were weak in December, King said he remains confident in the company's unit growth plans.

"Our new stores continue to perform very well," King said Monday in a statement. "Opening new stores with outstanding returns remains a key priority and we are maintaining our plan to open fourteen to fifteen new stores in fiscal 2018."

Dave & Buster's expects to grow its number of locations by about 14 percent this year. The company has been one of the few brands to have double-digit unit growth and still produce positive same-store sales, Nicole Miller Regan, an analyst at Piper Jaffray, told CNBC in a recent interview ahead of Monday's news.

By mid-2017, Dave & Buster's had signed 23 leases for locations that are expected to open between now and 2019.

Most notably, the arcade and sports bar has been filling real estate voids left by the closing of stores all across the country. Adding brands such as Dave & Buster's to malls has become increasingly important to landlords and real estate firms, especially as foot traffic in these locations continues to decline.

The brand also has a flexible real estate model, which allows it to operate either within a mall or as a standalone location.