Dave & Buster's Entertainment (PLAY) - Get Report shares were tumbling Thursday as the dining and entertainment company, reeling from the coronavirus pandemic shutdown, reportedly plans to cut more than 1,300 workers and warned it might have to file for bankruptcy if it can’t reach a deal with its lenders.
Shares of the Dallas company at last check were tumbling 24.8% at $14.39.
Dave & Buster's reached a short-term debt-relief deal with its lenders until Nov. 1, though they might not choose to provide more extensions, according to The Wall Street Journal.
If the chain fails to reach an agreement with its lenders, it might have to file for protection from creditors under Chapter 11 of U.S. bankruptcy law, the company warned in a recent securities filing.
The 1,369 Dave & Buster’s workers who are scheduled to be dismissed earlier had been furloughed, Restaurant Business reported, citing Worker Adjustment and Retraining Notification alerts. The federal WARN Act requires certain employers to give 60 calendar days of notice of job cuts.
The job cuts are to become permanent by Nov. 8, according to the notices.
The largest number of cuts are planned for the chain’s three Michigan locations, three Massachusetts stores and two Denver units.
In a letter to state employment officials, the company said it "did not foresee how significantly and for how long a time the pandemic and related governmental lockdown orders would impact our business.
"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."
Last week, the company said second-quarter sales plummeted 85% to $50.8 million from $344.6 million a year earlier. It posted a loss of $58.6 million, or $1.24 a share, compared with net income of $32.4 million, or 90 cents a share, a year earlier.
Analysts polled by FactSet had been expecting per-share earnings of $1.40 on sales of $78.5 million.
The chain has reopened just 89 of its 137 locations and said it will likely be December before all units are operational.
Dave & Buster's couldn't be reached for comment.