Stock prices for Hollywood Bowl drop due to decreased sales caused by unfavorably hot weather conditions.
Hollywood Bowl shares decline by 8% as unseasonal warmth curbs sales
Hollywood Bowl, the UK's leading ten-pin bowling operator, saw its stocks plummet by 8% on Thursday, following the publication of its H1 results for the six months ending March 31st. The company attributes this recent downturn to the recent warm weather, which prompted consumers to opt for outdoor activities instead of visiting their bowling alleys.
The company acknowledged a 'short-term' impairment to its British operations between March and May, owing to the nation basking in unusual warmth. Yet, Hollywood Bowl remains optimistic about the coming half-year, thanks to measures designed to offset the weather-induced slump, and has kept its full-year earnings guidance unchanged.
Despite revenue growth falling below expectations, Hollywood Bowl decided to augment its interim dividend by 3%, raising it to 4.1p. In a statement, CEO Stephen Burns commented that while the prolonged period of exceptional warm weather from March to May had temporarily influenced trading, the company's margin and cost management, coupled with strong operational performance, remain robust.
"Looking ahead, we're well-positioned for the critical summer holiday period," added Burns.
The company has pointed towards drier weather in the winter months as a contributing factor to a 4.5% decline in bowling game bookings during the first six months. The decline was also accelerated by the timing of Easter and last year's leap year, as well as competition from new socializing offerings in certain areas.
However, the company managed to achieve a 1.3% growth in like-for-like revenues for its British division during the H1, due to increased spend per game. Sales in the bowling centers even improved by 1.5%.
Pre-tax profits dipped by 9.4% to £28 million on an underlying basis for the six months ending March 31st, owing to escalating costs. The wage bill rose by £2.6 million to £24.9 million due to increased minimum wage and employer national insurance payments.
Hollywood Bowl manages 75 bowling alleys in the UK and 15 in Canada, intending to expand its operations to 130 locations by 2030. It opened three new centers during the first half of 2023, with Reading and Uxbridge slated to open during the second half of the financial year.
Analyst Dan Lane of Robinhood cited the attractive dividend and buyback plans as potential frustrations for investors who question whether the funds could be better utilized in the company's expanding North American ventures.
"The rising dividend - there looks to be a good window of opportunity in North America and all newly opened UK centers are expecting an ROI of 19%," noted Lane, highlighting the chance to pump the cash pile into new sites.
Hollywood Bowl shares closed at 271.22p on Thursday, having registered a fall of 16% over the preceding year. For those interested in investing in the market, a variety of DIY investing platforms are available, including AJ Bell, Hargreaves Lansdown, interactive investor, InvestEngine, and Trading 212.
"Investors considering options for their savings may find potential opportunities in the fluctuating share prices of Hollywood Bowl, as the UK's leading ten-pin bowling operator experienced a 8% decline due to unfavorable weather conditions affecting sales. Despite this setback, the company remains optimistic about the summer season and has maintained its full-year earnings guidance. Some analysts, like Dan Lane of Robinhood, suggest that the funds allocated for dividends and buybacks could be better utilized in expanding the company's North American ventures, which show promise."
"To keep abreast of general-news and business trends related to Hollywood Bowl and other companies, various finance and entertainment resources are accessible for individuals interested in investment, such as AJ Bell, Hargreaves Lansdown, interactive investor, InvestEngine, and Trading 212."
"In the wake of Hollywood Bowl's share decline, it's essential for potential investors to carefully evaluate their strategies, considering the company's financial performance, expansion plans, and potential developments in the entertainment industry that might impact its prospects."
