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Chuck E. Cheese's boosts marketing budget

Parent company CEC Entertainment aims to counter slipping sales

CEC Entertainment Inc., parent to the Chuck E. Cheese’s brand, plans to boost its marketing spending in both traditional and digital platforms this year to counter sales slippage seen in last year’s fourth quarter, company executives said Thursday.

The company plans to increase its marketing expenditures by $6 million in 2013, to $41.4 million, compared to the $35.4 million spent in 2012, according to Michael Magusiak, CEC’s president and chief executive. This includes “a television media plan with increased weights across for a year, a strong digital advertising plan and enhanced creative plan with both brand and promotional advertising,” he said.

CEC is also planning to unveil “two very significant promotions starting in April and June of this year” for Chuck E. Cheese, said Magusiak, though he noted the company would not release details.

“We believe that these promotions supported by increased TV and digital media will increase customer traffic,” he said.

The company began promoting value initiatives in a TV campaign that started airing Feb. 18.

Irving, Texas-based CEC earlier reported a loss of $600,000, or 3 cents per share, in the Dec. 30-ended fourth quarter, compared to a profit of $2.7 million, or 15 cents per share, in the prior-year period. The loss included $2 million of asset impairment charges. Revenue in the quarter slipped 0.4 percent to $177.8 million from $178.6 million in the prior year.

Tiffany Kice, CEC’s chief financial officer, said same-store sales in the fourth quarter fell 2.2 percent and declined 2.9 percent for the year.

While January same-store sales rose 3.2 percent, Magusiak said same-store sales dropped off considerably in February, decreasing 16.3 percent in the first week, 12.3 percent in the second and 0.7 percent in the third week.

Magusiak said late tax returns, the expiration of the payroll tax break on Jan. 1 and increased gas prices seemed to have a negative impact on Chuck E. Cheese’s typical guests, young families with lower incomes. Birthday-celebration income appeared to decline proportionately more than sales in general, he noted. “We attribute part of that to tightening of discretionary income,” he said.

The company is also investing approximately $27 million to improve existing stores in 2013. The effort will impact 120 stores, including 100 game enhancements, eight major remodels, and 12 expansions.

The 565-unit chain also plans to open about 15 new stores in 2013, including one relocation, and will close four stores.

New stores opened between 2007 and 2010 averaged more than $2 million in sales each during 2012, Magusiak said. That “produced a cash return on investment of slightly over 20 percent,” he noted.

CEC is also looking to further international development of the brand, Magusiak said. The company recently expanded the role of Roger Cardinale, CEC executive vice president and a 25-year veteran of the company, to include the title of president of the CEC’s international division.

In 2012, CEC signed seven new development agreements for 42 stores in Mexico, Peru, the Philippines, Trinidad, Bahrain, Saudi Arabia and United Arab Emirates.

“I believe that we have an excellent international development concept as evidenced by the significant average-unit sales volume of our stores overseas,” Magusiak said.

CEC has stores in 47 states and eight nations and territories. Of the 565-unit system, 514 in the United States and Canada are owned and operated by the company.

Contact Ron Ruggless at [email protected]
Follow him on Twitter: @RonRuggless

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