Will this new entertainment center hit the jackpot in Hawaii’s soft economy?
When the food-and-fun-themed Dave & Buster’s Inc. first opened its doors on Oahu on Oct. 3 last year, it set a company-wide sales record. Grossing an average of $550,000 in weekly volume in its first month, the Honolulu branch, located in the Victoria Ward Center, recorded the highest opening-weekend sales ever of any of D&B’s 31 locations. “To set the all-time opening weekend sales record for a store that is only 40,000 square feet is quite an accomplishment,” says Dave Corriveau, co-founder of Dave & Buster’s. “Taking into account the current temporary softness of the Hawaiian tourist market makes this sales record amazing.”
And surely, locals have taken to the virtual amusement and Vegas-style casino games (complete with cocktail call-switches for that authentic “gambling, but not” feel). But will Dave & Buster’s be able to weather the fickle and fastidious local crowd?
The Honolulu store’s opening-month average weekly sales volume of $550,000 was around 25 percent higher than the Milpitas, Calif., branch that previously held the record with $443,000. But in the second month of operation, D&B Honolulu’s average weekly volume dipped to $463,000, while the Milpitas store increased to $512,000. “Still, the stores opened at different times of the year, and in different times altogether. Honolulu opened post-Sept. 11,” says Tim Dungan, director of financial operations for Dave & Busters. “But the Milpitas store is 60,000 square feet in comparison with Honolulu’s 40,000. So in comparison, what it did was a big surprise.” Dungan says the majority of D&B’s stores average 50,000 to 70,000 square feet, with average sales per week around $227,000 per store.
“Every market is different,” says Mitch D’Olier, president and chief executive officer of Victoria Ward Ltd. “D&B’s financial performance to date, which I would characterize as having a wonderful community response, indicates long-term sustainability.” Dave & Buster’s successful new openings, such as Honolulu’s, however, are often overshadowed by the company’s inability to meet and deliver expected results. Analysts say a downward sales trend over the past several quarters has kept D&B down to a single-digit stock.
The company was doing just fine, with its stock climbing upwards of $25 per share in the late 1990s, when it ran into some expansion-related issues. “They just opened a little too fast and they had to back off their expansion,” says Allan Hickock, senior research analyst with Minnesota-based U.S. Bancorp Piper Jaffray. Hickock has been following Dave & Buster’s (NYSE:DAB) since it went public in June 1995. “Then they missed their earnings and the stock got knocked down, and it hasn’t really recovered. It’s bumped along between $6 and $10, where it’s been for a couple years now. It’ll be some time before it picks up again, but I think it is a very inexpensive stock considering their growth prospects,” he says.
Ever since Dave & Buster’s stock dropped, the company’s growth nationwide has been slow and methodical, averaging about four new store openings per year. In addition to the Honolulu branch, Dave & Buster’s last year also opened stores in Miami, Fla.; Frisco, Texas; and Cleveland.
Sean McCullough, general manager of Dave & Buster’s Honolulu, says he is certain the mix of food, drinks and dizzying array of games for adults will ensure its longevity in Hawaii. “What’s going to add to our success here is that we are a locally based piece,” he says. “Nationwide, we look at getting about 80 percent locals and 20 percent tourists into our stores.” He adds that pre-opening demographic surveys indicated there was ample room for an entertainment complex aimed at their target market of 21- to 35-year-olds.
And that does seem to be the case for now, as locals regularly migrate between Dave & Buster’s and the neighboring Consolidated Theaters on any given night. Both offer a comforting diversion from newscasts of terrorism and biological warfare. “Just like anywhere else, people in Hawaii like food and fun. And now, especially, when consumers are pulling in their horns, they’re not buying new homes or cars or electronic gadgets, so where do they spend it? Food and fun,” says Hickock.