Chuck E. Cheese's sales from birthday parties during Q3 were down 11 percent from the year prior. The double-digit hit affected the company's overall performance during the quarter, with comp store sales down 2.1 percent overall.
During CEC's earnings call last week, CFO Tiffany Kice said the "overall political and economic uncertainties and increased competition from kids' movies" also negatively impacted sales during the period.
To remedy the trend, the company has modified its marketing plan to include a new birthday party-themed commercial that started airing in October.
"We are incredibly disappointed with our birthday sales. One of the strategies we implemented was to reduce advertising of birthday parties on TV and focus more on everyday walk-in business. That reduced our trip levels," said Michael Magusiak, CEO and president. "We (since) changed the creative and have seen birthday sales trends improve since we've made those adjustments."
Plan in place to increase comp sales
Magusiak also shared CEC's plan to increase comp sales. It includes:
- Enhance capital reinvestment
- Evolve the concept with "major attractions"
- Continue refinement of pricing, including token pricing
- Enhance marketing strategy, which will be fully in place in 2014
To achieve No. 2, CEC is currently testing two "major attractions" that received positive guest feedback, Magusiak said, and is installing a third within the next two weeks.
In conjunction with the pricing strategy, the company has revised its couponing to include reduced discounts.
"We believe that this pricing strategy was very effective based on a significant increase in sales of value deals and improved margins resulted from reduced discounting," Magusiak said.
The pricing tweaks also include CEC's token costs. Games require one token to play and can be purchased for as low as 20 cents each with the new structure. The company is testing reduction of tokens included in value deals, as well as token deals and coupon offers.
"Essentially, we're testing a price increase in these (test) markets and still believe that our game value remains significantly better than our competitors," Magusiak said. "We have also, in one of the markets, reduced the number of tokens in value deals. So it's the same prices, same pizza product and drinks, but with fewer tokens."
Another primary component of the company's plan is to fully implement its refined marketing plan that it began rolling out in 2012. The company will continue to push reasons to visit and reach out to both kids and the mom demographic.
Magusiak also said there is a strong correlation between children's television birthday media and birthday sales.
CEC's test of banner ads to moms was ineffective in driving guest traffic, the company learned. Consequently, the 2014 marketing plan includes a reallocation of advertising expense from digital branding to TV.
Magusiak is also optimistic the chain's tie-in with the Freebirds movie will have a positive branding/marketing effect for Q4. The Freebirds movie runs through Thanksgiving and marks Chuck E. Cheese's first ever filim sponsorship.
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