Lucky Strike (LUCK)

Entertainment venue operator Lucky Strike (NYSE:LUCK) reported Q3 CY2025 results topping the market’s revenue expectations, with sales up 12.3% year on year to $292.3 million. The company’s full-year revenue guidance of $1.29 billion at the midpoint came in 0.6% above analysts’ estimates.

Company Overview

Born from the transformation of traditional bowling alleys into modern entertainment destinations, Lucky Strike (NYSE:LUCK) operates bowling alleys and other entertainment venues with upscale amenities, arcade games, and food and beverage services across North America.

Leisure facilities companies often sell experiences rather than tangible products, and in the last decade-plus, consumers have slowly shifted their spending from "things" to "experiences". Leisure facilities seek to benefit but must innovate to do so because of the industry's high competition and capital intensity.

Lucky Strike Entertainment competes with other entertainment venue operators like Dave & Buster's (NASDAQ:PLAY), Main Event Entertainment (owned by Dave & Buster's), Round One Entertainment, and regional family entertainment centers that combine dining, games, and activities.

A company’s long-term sales performance is one signal of its overall quality. Any business can have short-term success, but a top-tier one grows for years. Over the last five years, Lucky Strike grew its sales at an incredible 57.6% compounded annual growth rate. Its growth beat the average consumer discretionary company and shows its offerings resonate with customers.

We at StockStory place the most emphasis on long-term growth, but within consumer discretionary, a stretched historical view may miss a company riding a successful new product or trend. Lucky Strike’s recent performance shows its demand has slowed significantly as its annualized revenue growth of 8.1% over the last two years was well below its five-year trend. Note that COVID hurt Lucky Strike’s business in 2020 and part of 2021, and it bounced back in a big way thereafter.

We can dig further into the company’s revenue dynamics by analyzing its same-store sales, which show how much revenue its established locations generate. Over the last two years, Lucky Strike’s same-store sales averaged 2.4% year-on-year growth. Because this number is lower than its revenue growth, we can see the opening of new locations is boosting the company’s top-line performance.

This quarter, Lucky Strike reported year-on-year revenue growth of 12.3%, and its $292.3 million of revenue exceeded Wall Street’s estimates by 3.3%.

Looking ahead, sell-side analysts expect revenue to grow 5% over the next 12 months, a deceleration versus the last two years. This projection doesn't excite us and suggests its products and services will see some demand headwinds.

Lucky Strike’s operating margin has been trending up over the last 12 months and averaged 10.4% over the last two years. Its profitability was higher than the broader consumer discretionary sector, showing it did a decent job managing its expenses.

In Q3, Lucky Strike generated an operating margin profit margin of 9.7%, up 4.7 percentage points year on year. This increase was a welcome development and shows it was more efficient.

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

Although Lucky Strike’s full-year earnings are still negative, it reduced its losses and improved its EPS by 9.4% annually over the last four years. The next few quarters will be critical for assessing its long-term profitability.

Although earnings are undoubtedly valuable for assessing company performance, we believe cash is king because you can’t use accounting profits to pay the bills.

Lucky Strike has shown poor cash profitability over the last two years, giving the company limited opportunities to return capital to shareholders. Its free cash flow margin averaged 1.5%, lousy for a consumer discretionary business.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? Enter ROIC, a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).

Lucky Strike historically did a mediocre job investing in profitable growth initiatives. Its five-year average ROIC was 14.2%, somewhat low compared to the best consumer discretionary companies that consistently pump out 25%+.

We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Unfortunately, Lucky Strike’s ROIC has decreased significantly over the last few years. Paired with its already low returns, these declines suggest its profitable growth opportunities are few and far between.

As long-term investors, the risk we care about most is the permanent loss of capital, which can happen when a company goes bankrupt or raises money from a disadvantaged position. This is separate from short-term stock price volatility, something we are much less bothered by.

Lucky Strike’s $2.72 billion of debt exceeds the $31.03 million of cash on its balance sheet. Furthermore, its 7× net-debt-to-EBITDA ratio (based on its EBITDA of $377.4 million over the last 12 months) shows the company is overleveraged.

At this level of debt, incremental borrowing becomes increasingly expensive and credit agencies could downgrade the company’s rating if profitability falls. Lucky Strike could also be backed into a corner if the market turns unexpectedly – a situation we seek to avoid as investors in high-quality companies.

We hope Lucky Strike can improve its balance sheet and remain cautious until it increases its profitability or pays down its debt.

It was encouraging to see Lucky Strike beat analysts’ revenue and EBITDA expectations this quarter. We were also glad its full-year revenue and EBITDA guidance exceeded Wall Street’s estimates. Overall, this print had some key positives. The stock remained flat at $8.07 immediately following the results.

Updated: December 3, 2025 at 10:15 PM EST

We think that the latest earnings result is only one piece of the bigger puzzle. If you’re deciding whether to own Lucky Strike, you should also grasp the company’s longer-term business quality and valuation.

We see the value of companies helping consumers, but in the case of Lucky Strike, we’re out. Although its revenue growth was impressive over the last five years, it’s expected to deteriorate over the next 12 months and its same-store sales performance has disappointed. And while the company’s projected EPS for the next year implies the company’s fundamentals will improve, the downside is its declining EPS over the last three years makes it a less attractive asset to the public markets.

Lucky Strike’s P/E ratio based on the next 12 months is 46.6x. While this valuation is reasonable, we don’t see a big opportunity at the moment. There are superior stocks to buy right now.

Wall Street analysts have a consensus one-year price target of $13.25 on the company (compared to the current share price of $8.42).

Although the price target is bullish, readers should exercise caution because analysts tend to be overly optimistic. The firms they work for, often big banks, have relationships with companies that extend into fundraising, M&A advisory, and other rewarding business lines. As a result, they typically hesitate to say bad things for fear they will lose out. We at StockStory do not suffer from such conflicts of interest, so we’ll always tell it like it is.