Bowlero's stock slides 18% after earnings fall short of estimates and company offers soft guidance

By Ciara Linnane

Quarter started on a slow note because of bad weather

Bowlero Corp.'s stock tumbled 18% Monday, after the operator of bowling alleys and other entertainment offerings posted weaker-than-expected earnings for its fiscal third quarter and said full-year numbers would come in at the low end of its guidance.

The stock was headed for its biggest one-day decline on record based on data going back to April 23, 2021, according to Dow Jones Market Data. Bowlero went public in 2021 by merging with a special-purpose acquisition corporation.

The Richmond, Va.-based company (BOWL) reported net income of $23.8 million, or 13 cents a share, for the quarter to March 31, after a loss of $32.1 million, or 22 cents a share, a year ago. Revenue rose to $337.7 million from $315.7 million.

The FactSet consensus was for EPS of 23 cents and revenue of $341.0 million. Same-store revenue fell 2.1%.

Chief Executive and Founder Thomas Shannon said the quarter started slowly due to weather, namely blizzards and flooding across the U.S.

"Post the first three weeks of January, we found a stable footing and increased investments to drive traffic," he said in prepared remarks. "After the first three weeks of the quarter, we achieved a positive same-store-comp and double-digit total growth."

The company opened Lucky Strike in Miami during the quarter and expects four more new builds in the next nine months: two in Denver and two in California, he said.

Read also: Bowlero's stock is a buy after strong boost in foot traffic in February, says Jefferies

Bowlero last week closed an acquisition in the water-park sector of a company called Raging Waves, which is the biggest outdoor water park in Illinois, he said.

"We will continue to use internal and external investments to support increasing wallet share from customers in the out-of-home entertainment space, helping grow our industry-leading free cash flow generation," Shannon said.

On a call with analysts, the executive said when Bowlero acquired Lucky Strike, it was impressed by how much food and beverage they were able to sell. The company is now implementing lessons learned into its own F&B business.

"We are revamping our menus, increasing food and beverage training and improving our hiring processes to make a strong organic impact on our business," he said, according to a FactSet transcript.

The Raging Waves acquisition aims to expand the company's overall total addressable market, he said. While bowling alleys offer a $4 billion TAM, the broader entertainment world's TAM is more like $100 billion, he said.

In the same vein, the company acquired an asset called Mavrix and Octane in Scottsdale, Ariz., last year, half of which is an indoor go-kart track that has proved popular. That asset is on track to generate $8 million of Ebitda in its first year against a $33.5 million purchase price.

"So there are a lot of really, really good businesses and location-based entertainment that share fundamental similarities with bowling but aren't bowling," he said.

Bowlero is now expecting its fiscal 2024 revenue to come in at the low end of guidance, which was for growth of 10% to 15%.

The company ended the quarter with $212 million of cash and $432 million of total liquidity.

The stock is down 11.8% in the year to date, while the S&P 500 SPX has gained 7.5%.

-Ciara Linnane

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05-06-24 1143ET

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