There was only one double-digit gainer among FTSE 250 stocks today (27 May), and that was Hollywood Bowl (LSE:BOWL). As I write, it’s up 16.5% to 302p, streets ahead of second-placed Pets at Home (+7.6%).

Let’s take a look at what caused this massive jump…

A resilient business during difficult times

Logging into a data provider, you might have assumed that some sort of offer had come in for the UK and Canada’s leading ten-pin bowling operator. After all, the stock was down 28% in 12 months before today, and looked decent value.

At least that’s what I thought, as I’ve been banging on about this stock in recent weeks. But it wasn’t a takeover bid. Instead, the company released an encouraging interim report covering the six months to the end of March.

The headline numbers looked decent:

• Revenue was up 9.5% to £141.5m
• Adjusted pre-tax profit increased 8.1% to £32.1m
• Adjusted earnings per share (EPS) rose 11.3% to 14.5p
• Interim dividend hiked 10.2% to 4.52p

Like-for-like (LFL) sales growth was more modest at 2.3%, but management said Canada’s performance was hit by “unseasonably heavy snowfall in certain key periods”. LFL sales growth was 2.6% in the UK, which isn’t too shabby considering the relentless pressure on household budgets. 

The good news is that spend per game rose significantly across both major territories (+7.6% in the UK and +9.7% in Canada). This was boosted by modest price increases, optimising peak pricing, add-on sales like VIP lanes, and a “strong amusements mix”. 

During the period, Hollywood Bowl refurbished a centre in Norwich and opened a new one in Edmonton, Canada. This brought the total to 93. But it’s still on course to have 130 centres open by 2035, including 35 in Canada by 2032 (bringing forward the original planned total there by three years).

Against a challenging backdrop, the resilience of our business model, and ongoing appeal of our value offer for customers is clear.
CEO Stephen Burns

Why is the stock surging?

Of course, the ongoing cost-of-living crisis is a key risk moving forward. With food inflation possibly hitting double digits by Christmas, and energy bills set to rise yet again, it’s just a brutal time for the leisure sector in general. Second-half growth could slow.

Given this challenging backdrop, I was quite surprised to see the share price surge so high. Seemingly some investors had been expecting far worse news during the half (perhaps falling LFL growth and stagnant spend per game).

Meanwhile, costs are being kept under control, profits are growing, and a £5m share buyback programme was announced for H2. A 10% dividend hike also signals confidence in the outlook.

My takeaway

My view is that Hollywood Bowl is well equipped to carry on performing over the medium term. It has a solid balance sheet, prime locations, strong supplier relationships, and a clear growth strategy.

Meanwhile, a family of four can bowl for £26 in the UK, which is more affordable than many rival activities (zoos, theme parks, football matches, etc). So there’s a strong value proposition.

After today’s rise, the stock is trading at around 13 times forward earnings while still offering a well-covered 5% dividend yield. Taking a long-term view, I reckon Hollywood Bowl is worth considering, especially on dips.

Should you invest £5,000 in Hollywood Bowl Group Plc right now?

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Ben McPoland has no position in any of the companies mentioned.