Buy to Open the January 20, 2017 put on Dave and Buster’s Entertainment (NSDQ: PLAY) with a strike price of $45 at $2.65 or lower. Symbol (PLAY170120P45)

These puts should be purchased before the company reports its third quarter (ends October). This date has not been formally announced but is expected on or around December 1.

Dave and Buster’s Entertainment operates 86 entertainment and dining venues in the U.S. Customers pay to play video and arcade games while dining on burgers, beer and drinks like vodka spiked snow-cones.

Earnings growth will stall as dining revenue drops and a profit boost from a shift to electronic game ticketing concludes.

1. After multiple price increases, food and beverage sales are declining. Food comp sales dropped an unexpected 2.2% in the last quarter. This is the second quarter in a row with a decline in diners per store. Gaming sales will likely follow suit as management has long remarked that dining is the lure to get video game playing customers into its stores.
2. Management lowered same store sales expectations from a range of 3.25%-4.25% to a range of 2.25%-3.25% for the year, a large adjustment considering there are only two quarters left in the fiscal year.
3. A shift from paper based gaming cards to electronic tickets was completed in last year’s second quarter. This program boosted gaming profit margins from 86% to 88% but will not be repeated to provide fuel for higher profit growth.
4. Games with prize rewards, known as redemption games, have been dropping as a percent of revenue, an omen for lower future visits. Management notes that redemption games spark the enthusiasm so many seek at its stores. Simulation or virtual reality games are more easily replicated at home and bring in fewer customers.
5. Since its October 2014 IPO insiders have sold 27 million shares.
6. David Jones, senior advisor to the company’s largest shareholder, Oak Tree Advisors, resigned effective immediately from the company’s Board of Directors on July 8, 2016. While a sudden departure like this does not always signify a future calamity, it is unusual and could signal problems.