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Issue Date: Vol. 53, No. 12, December 2013, Posted On: 11/8/2013

Movie Competition Hits Chuck E. Cheese's In Third Quarter; Net Falls 5.1%

Emily Jed
TAGS: Chuck E Cheese's, CEC Entertainment Inc., arcade, CEC 2013 third quarter, Michael H. Magusiak, Chuck E. Cheese's, birthday sales, amusement business, Children's entertainment

IRVING, TX -- CEC Entertainment Inc.'s revenue fell slightly as same-store sales at its Chuck E. Cheese's locations sank 2.1% in the last quarter. The parent company of the pizza-and-arcade chain posted a 0.4% decline in third-quarter revenues, which dipped to $195.9 million from $196.6 million a year earlier. The company attributed the dip to a 2.1% decline in comparable-store sales, partially offset by revenues from new store development.

Net income fell 5.1%, or 43¢ a share, to $7.4 million, up from to $7.8 million, or 45¢ a share, for the third quarter of 2012.

For the first nine months of 2013, total revenues increased 2.8%, or $17.5 million, to $643.2 million from $625.7 million in the comparable 2012 period. The company attributed the increase to a 1% lift in comparable store sales and revenues generated from new store development.

Net income for the first nine months of 2013 increased 8.4%, or $2.78 a share, to $47.9 million from $44.2 million, or $2.50 a share, a year earlier.

"I am disappointed in third-quarter comparable store sales," said Michael H. Magusiak, CEC's president and chief executive. "However, our sales turned positive in the first four weeks of the fourth quarter.

The CEC chief speculated that increased competition from movie theaters contributed to the disappointing third-quarter performance. Revenue from kids' movies rated G and PG increased by approximately 65%, or $320 million, compared with the same period in the prior year, according to Magusiak.

Chuck E. Cheese's birthday party business declined an unusual 11% from July to September, following a 5.5% drop-off over the first half of the year. "We are incredibly disappointed with our birthday sales so far this year," Magusiak said.

Magusiak said the company's plans for new major attractions and new locations both domestically and internationally will provide a "significant opportunity to grow our concept."

CEC plans to open eight to nine new company-owned stores by the end of fiscal 2013. It has opened eight new stores so far and has closed three stores, and plans to open five to six more later in the fourth quarter.

The arcade and pizza chain expects comparable store sales to be relatively flat for the fourth quarter of 2013 and earnings per share to a range of $0.15 to $0.19.

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