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Dave & Buster’s (PLAY) shares sink 29% on possible bankruptcy
Dave & Buster’s Entertainment (PLAY) shares plummeted 29% on Thursday after the restaurant company, which is based in Dallas, Texas, admitted that it was close to bankruptcy and is reportedly planning to shed 1,300 workers in a last-ditch attempt to remain afloat.
In an official letter, Dave & Buster’s said that the pandemic and resulting state-wide closures had been disastrous and that it had not foreseen how significantly it would hit business conditions.
It added: “We also did not foresee that lockdown orders, initially issued for short durations in only a few cities, would spread through the country and be repeatedly extended.”
The Wall Street Journal revealed that the company is now attempting to reach a more comprehensive agreement with its lenders after agreeing to a debt-relief deal that will run until 1st November.
If Dave & Buster’s cannot strike a deal soon, it warned that it might have to file for bankruptcy.
The chain is already planning to cut 1,369 jobs, with permanent dismissals expected by 8th November after an initial furlough period.
The bad news comes only a week after Dave & Buster’s said that sales slumped 85% to $50.8m in Q2.
It also came in with a loss of $1.24 per share for the period, compared to a profit of $0.90 per share a year ago.
Analysts were surprised by the scale of the decline after forecasting earnings of $1.40 per share and $78.5m in sales.
Since the pandemic forced store closures, Dave & Buster’s has only been able to reopen 87 of the 137 locations it operates in across the US.
Investors were obviously concerned about the latest developments and shares quickly retreated after opening on Thursday.
At 1pm on the Nasdaq, PLAY shares were down around 27% to $13.91.
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