- WHITE PAPERS
Chuck E. Cheese's marketing and cost-cutting strategies are gaining some traction, as evidenced by its second quarter comp store sales, which were up 2.9 percent.
CEO Mike Magusiak provided highlights of these strategies during the company's earnings call Thursday afternoon. Although sales were up throughout Q2, he warned that July sales dropped by 2.3 percent, attributable to a "significant" increase in G and PG movie releases.
Box Office Mojo reported that box office receipts for G and PG-rated movies during July were up $261 million compared to the same period last year.
"The increase in box office receipts exceeded our total core store sales during the same time period by approximately 4.5 times," Magusiak said. "We believe that over the short period of time, kids' movies negatively impacted our sales but do not believe the impact will have a material impact on our fiscal year."
With the Q2 results, Chuck E. Cheese's marketing shift – from kids to kids and parents – seems to be resonating. The company's marketing expenditures are expected to increase by about $6 million this year (to $41 million) compared to last year, anchored by an increase in national TV messaging.
"If you look at trip levels in dollars, in other words national media advertising on TV, we have a very strong plan in the second half of the year. Our advertising trips, the number of commercials that kids and parents will see, are up about 40 percent in the second half of this year versus the second half of last year," Magusiak said.
Chuck E. Cheese's is also trying to generate visits through its national "Every Kid's a Winner" promotion, in which each kid receives a peel off card when entering a restaurant that includes free tickets, tokens or a trip in the Ticket Blaster.
In Q4, the brand will partner with a kids' movie for its national release, another initiative to increase traffic.
Cost savings efforts
Putting some weight behind its marketing messaging isn't the only strategy that's starting to pay off for CEC. The company has also yielded results from its cost-cutting efforts including:
When Magusiak was asked to share his perspective about the general consumer environment, he circled back to the movie metric.
"The reality is, our sales are volatile over a short period of time but they have really been consistent across the nation through the first half of the year and then we look at movies ... (which) increased $261 million," he said. "We've had a good first half of the year and maybe there are some consumer slowdown but the one factor that we've looked at more any other is the external factor of movies."
Read more about operations management.