Dave & Buster’s CEO spells out everything that’s wrong with his company (and how he’ll fix it)

By David Goldman, CNN

(CNN) — Dave & Buster’s new CEO is not holding back.

Tarun Lal, who took the reins in July, said on his first earnings call with Wall Street analysts Monday night that his company is in more trouble than previously believed. Profit growth continued to shrink, sales have flatlined, and the stock is sinking sharply: down 17% Tuesday.

With just a couple months under his belt, Lal has the advantage of using a tried and true new-CEO strategy: blame the last guy. In a presentation to analysts, Lal detailed a laundry list of prior Dave & Buster’s (PLAY) strategies that were broken.

• The company was pushing too many appetizers on customers, which encouraged sharing and hurt sales.
• Dave & Buster’s has virtually stopped purchasing new games. Customers weren’t as excited to come back, and sales fell.
• Staff had insufficient training, and corporate management had communication breakdowns with employees, disrupting service.
• Remodeling efforts largely failed, and expensive prototypes for new locations were a flop.
• Dave & Buster’s stopped advertising on TV altogether, reducing brand awareness.
• The company ramped up promotions, which confused customers and drove down profit.

“In reviewing our performance, it became very clear where our approach was falling short,” Lal said on the call. “We’re not waiting to make changes and implement our refocused strategy. We are making changes and implementing them real-time.”

Lal said the company has started advertising on TV again and reduced the number of promotions it offers. It changed up its menu, pushing more profitable entrees over appetizers. The chain also introduced new, streamlined communications initiatives and started re-training employees. It launched 10 new games in locations and started making customers aware of its remodeling efforts.

It’s early days, but Lal said the results have already been fruitful.

Dave & Buster’s food and beverage business is turning “solidly” positive, Lal said, and newly remodeled stores are now outperforming older stores by a substantial margin.

But investors have heard this story before. Sales at Dave & Buster’s have been on the downswing for quite some time, and Lal acknowledged that the trend is continuing this quarter. Past management unveiled a growth strategy to help the company rebound, but it didn’t work – and the chain now has a new leadership team.

Lal said past leaders may have been onto something, but the all-at once change strategy was inefficient.

“As you all know, our company unveiled a comprehensive strategic plan at our investor day in 2023,” Lal said. “I believe this plan had the right ideas. We just attempted to implement too much at the same time.”

Lal noted that a rebound in inflation threatens to hurt the company in the near-term as customers look for more value for their money. But the CEO said his new marketing efforts can help overcome that.

“With value, remember, it’s all about trust. It’s not how much you’re paying; it’s about the value that you’re actually receiving from the brand,” Lal said. “So I really believe that a key part of the pivot that we are making is kind of really simplifying the messages and making it really transparent for our customers on what they are getting for the money they are spending.”

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