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Dave & Buster's stock sinks as results miss estimates. It's hoping remodels and price increases will help results.

By Bill Peters

Gaming and restaurant company says trends have improved 'over the last several weeks'

Shares of Dave & Buster's Entertainment Inc. tumbled after hours on Wednesday after the gaming and restaurant chain reported first-quarter results that missed Wall Street's expectations, amid what executives called a "complex" economic backdrop.

However, executives said that sales and profits had improved through May and early June as it tries to revamp stores, strengthen its loyalty program and upsell consumers on food and games.

The company, known for its massive arcades and sports bars, reported net income of $41.4 million, or 99 cents a share, compared with net income of $70.1 million, or $1.45 per diluted share, in the same quarter last year.

Revenue fell 1.5% year over year to $588.1 million, while same-store sales fell 5.6%.

Analysts polled by FactSet expected earnings per share of $1.73, on revenue of $616 million and a same-store sales decrease of 3.8%.

Management also said it logged more "incremental labor and marketing costs" related to its new menu, a new service model, new technology and an "unsuccessful marketing campaign test." The company characterized those costs as something that was unlikely to be repeated.

Shares of Dave & Buster's (PLAY) fell 10.7% after hours.

The chain reported the results as it tries to remodel locations to attract families and larger group events. It has also tried to raise food and drink prices as well as the prices to play games, introduce Wi-Fi and server tablets to stores, and upgrade its payment-processing systems.

Those efforts have come amid broader menu-price increases at many restaurants - as they try to balance higher wages and food costs - and as higher prices for basics force consumers to pull back on spending elsewhere.

Still, executives said on Dave & Buster's earnings call that customer satisfaction was high despite the increases at their arcades and restaurants. And they said they believed their gaming offerings were still considerably underpriced when compared with rivals.

Shares of Dave & Buster's are down 6.5% so far this year.

-Bill Peters

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06-12-24 2013ET

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