By Jennifer Williams

Lucky Strike Entertainment is bringing higher-end touches like coat checks and crispy shrimp bao buns to its bowling alleys -- but it's doing it on a budget.

The world's largest bowling alley operator -- known as Bowlero before a rebranding in December -- says it has elevated its food and drink offerings and given a fresh sheen to decor, while using technology to speed order-to-tabletop time for french fries, cocktails and other menu enticements.

At the same time, though, it's been scouring the budget for cost cuts -- examining, for instance, whether to keep the air conditioning on overnight. The trick has been to shear tens of millions of dollars from costs without denting its customers' experience.

"As long as we keep upgrading the product, the demand is there," said Chief Financial Officer Bobby Lavan. "But it's no stone unturned, no dollar unturned."

For the fiscal year ending this summer, Lucky Strike aims to slash capital expenditures by around $40 million, while at the same planning around $50 million in upgrades.

Lucky Strike's bowling portfolio includes its namesake locations along with the upscale Bowlero chain and AMF, which offers a more traditional bowling venue. While others in the entertainment space have struggled, the company's customers had continued to show up and spend, generally lifting revenue.

Until the last quarter, when revenue fell 1.8% to $300.1 million compared with a year earlier as fewer office parties and gatherings were held in a shorter holiday season. Same-store revenue for the three-month period ended Dec. 29 dropped 6.2%, though the company swung to a $28.3 million profit from a year-ago loss of $63.5 million.

Lucky Strike has been rolling out more premium food items, including beef birria tacos and mahi mahi bowls -- plus gluten-free options -- alongside standard bowling fare such as pizza and chicken wings. It seems to be working: Food now brings in more money than drinks, accounting for around $205 million in sales last year while alcohol brought in roughly $200 million, Lavan said.

In cold climates, the bowling locations have coat checks. Arcade games and other non-bowling diversions have been upgraded. Servers now have tablets to take customers' food and drink orders and communicate with the kitchen. The $5 million investment means a server who might have managed six bowling lanes can now cover 10. Servers are also prompted to offer upgrades such as herb truffle seasoning on the fries, Lavan said.

While Lucky Strike-branded locations are spruced up with add-ons like upscale bars, Bowleros are being rebranded and getting a more in-depth makeover. The company is investing anywhere from $75,000 to $200,000 per location to make them look and feel like the more spiffy Lucky Strike, Lavan said. The company hopes to end this year with 75 Lucky Strikes, up from 21, after the Bowlero revamps.

Then come cost cuts.

The single biggest line item is payroll, which comes to around $300 million a year. Lucky Strike started looking at staffing costs in September and cut them by around 9%, or $7 million, in the latest quarter. "We are checking every hour of every day of every center of every week and going, 'What is the right staffing model to maximize revenue and profitability?'" Lavan said. Asked whether that meant layoffs, he said, "So far, the focus has just been on hours."

In low-traffic hours, the number of workers might be reduced, Lavan said; at other times, it helps to have more staffers around. Using data, the company can now see, for instance, whether kiosks to order snacks and beverages result in as much sales as a server might during the same hours. One change so far has been to have more servers on Monday, Tuesday and Wednesday nights, which are often busy bowling league nights, when it used to be the assumption that kiosks would bring in the same amount of sales.

Cuts are also hitting signage, where the $10 million spent annually has been cut by 40%. Annual food costs of $60 million were cut by $5 million. In both categories, the savings are the result of shopping around for vendors rather than reduced quality of signs or food, Lavan said. During the pandemic, he said, vendors lifted their prices, whether warranted or not. Lucky Strike has pushed back, in some cases changing suppliers.

Utilities costs too, which run around $50 million a year, have also been shrunk. It takes time to cool locations if the air conditioning is turned off overnight, but it also costs to leave it on, Lavan said. The company determined the savings were in turning it off: as of last summer, the cool air is powered down every night.

Analysts wonder whether the chopping could go too far. "You don't want to get to the point where you're overcutting and then the experience sours," said Steve Wieczynski, a managing director at Stifel.

So far that doesn't seem to be the case, analysts say. They note that Lucky Strike is also moving into new businesses, including water parks and family entertainment centers, though bowling remains its focus.

Investors have worries about the distraction from bowling. But for Mike Swartz, an analyst at Truist Securities, the push into new categories is a way to appeal to consumers year-round. "Bowling is highly oriented towards October to March, when people want to be indoors because it's cold," he said. "Waterparks are the exact opposite."

Write to Jennifer Williams at jennifer.williams@wsj.com

(END) Dow Jones Newswires

February 19, 2025 05:30 ET (10:30 GMT)

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