Round One Arcade Expands in U.S. Market

Round One, a Japanese arcade operator, is doubling down on U.S. expansion. They opened their first standalone arcade in Las Vegas this April, featuring 150 claw machines across 2,000 sq. meters. Plans are to open two more arcades in fiscal 2024 and expand to 100 by 2032.

This growth strategy complements their existing hybrid bowling alleys, which also include billiards and arcade games. Round One aims to double these hybrid locations to 100 by 2032, investing 100 billion yen ($635 million) to quadruple their U.S. presence to 200 locations.

The U.S. market is proving more profitable for Round One, with a 19% operating margin compared to 14% in Japan. Their U.S. operating profit is projected to surpass Japan's by fiscal 2025.

Round One's stock has risen about 10% since announcing their U.S. expansion in early June. Analysts see this move as a positive sign for the market.

The company leverages its expertise in claw machines, capitalizing on the growing demand for Japanese character goods in the U.S. They also adopt cashless payments, allowing dynamic pricing based on game popularity.

Round One's expansion is facilitated by available U.S. real estate, particularly spaces vacated by struggling retail chains like Sears and Macy's.

Despite their success, Round One's stock price remains below its 2006 peak, reflecting a slower pace of growth compared to competitors like Genda, which uses mergers and acquisitions to build scale.

Analysts believe Round One is undervalued and expect earnings to rise from fiscal 2026, driven by reduced depreciation charges.