Attracted by its upgraded menus, online booking and rainproof entertainment, fun-starved families helped Hollywood Bowl enjoy the best month in its history in August. The outlet near you now stocks vegan burgers and craft beer — and you can wear your own shoes.
Hollywood Bowl is Britain’s biggest bowling operator with 64 venues: 61 alleys and three indoor golf sites under its new brand Puttstars. Since listing in London in 2016, it has continued to refurbish sites and introduced new technologies — including “pins on strings”, with a cord attached to each pin to reduce the risk of mechanical faults (although not all customers have fallen in love with the innovation).
Hollywood Bowl is due to release full-year results this week for the 12 months to September 30, with the City expecting sales to reach £149.5 million, up 15 per cent on pre-pandemic 2019.
It may seem risky to tip a leisure stock just as Covid restrictions are tightening, but Hollywood Bowl has some insulation from the crisis spooking city centres as workers are told to stay at home. First, the company does not rely on December’s festive season to draw in much of its revenues or profits. According to Investec, no single month in the past has ever represented more than 10 per cent of total annual revenues — Christmas for Hollywood Bowl is no more important than August, when schools are also closed.
Its alleys are also not a prime choice for large Christmas parties and the company has limited exposure to London, which will suffer the most from working-from-home orders and corporate party cancellations. It has also installed lane dividers to separate parties, and bowlers are encouraged to use the same ball each time.
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Investors have still been jittery in recent weeks, with the shares bouncing up and down over the past month. They closed on Friday at 228.5p, valuing the company at £392 million. Analysts expect that it will soon be able to return to paying a dividend, possibly as early as the first half of next year.
Despite the hit from Covid, Hollywood Bowl and its rivals are well placed to benefit from the structural shift towards experiences. The company is expected to open 14 new Puttstars and bowling alleys in the next couple of years. It also has plenty of liquidity — net cash of £30 million at its year end.
Despite sites being closed for large parts of this year, only opening in May, revenue growth in weeks open has been 29 per cent on a like-for-like basis. Barring significant further Covid restrictions, this looks promising. Buy.