IRVING, Texas -- Despite a 2 percent earnings increase in CEC Entertainment Inc.'s (NYSE:CEC) third quarter 2002, the combination of a 2.7 percent drop in comparable-store sales and the prediction of further sales declines in the fourth-quarter sent investors scurrying on Oct. 16.
CEC, which operates 420 Chuck E. Cheese outlets, reported on Oct. 15 that its earnings for the period, which ended Sept. 29, were helped by lower costs and good revenues from stores opened less than one year. Revenue rose 5 percent for the period to $148.9 million, up from $141.8 million in the same period in 2001.
Net income was up slightly at $16.5 million (59 cents a diluted share), compared to $16.2 million (57 cents a diluted share) for the same period last year.
In a release, the company blamed the negative comps on the soft economy and increased competition from children's movies -- two forces it believes will continue to impact it negatively. Consequently, it reduced its projected comp-store sales for the fourth quarter to a range of flat to negative 3 percent.
CEC's stock prices registered the impact immediately. On Oct. 15, share prices dropped 2.4 percent (73 cents) to $29.97. But by 11:30 a.m. (EST) Oct. 16, shares had fallen 14 percent more, trading at $25.85. As recently as March 5, its shares traded at $49.94.
In the first nine months of 2002, CEC's revenues rose to $464.1 million from $432.4 million in the same period last year.
Net income in the first nine months of 2002 increased to $58.7 million from $53.7 million in the same period of 2001.