Chuck E. Cheese's '02 comp-store sales drop 1%, first decline in 6 years

Feb. 19, 2003

IRVING, Texas -- CEC Entertainment, Inc. (NYSE:CEC), owner of the 437-store Chuck E. Cheese's chain, announced Feb. 18 its same-store sales for 2002 dropped 1 percent, its first such decline in six years.

According to a release, for the year ending Dec. 29, 2002, revenues were $602.2 million, up from $562.2 million in 2001. Net income, helped along by 31 new store openings, rose to $69.5 million from $64.2 million. Earnings per share (EPS) on a diluted basis for the year were $2.46, compared to $2.24 in 2001.

That figure exceeded analysts' expectations slightly, but the company warned in a conference call that increases in insurance and cheese costs will hurt its first quarter 2003 EPS.

CEC's fourth quarter 2002 comp-store sales dropped 2.5 percent, though revenues increased 6.4 percent to $138.1 million, up from $129.8 million in the prior year's period. Net income increased slightly to $10.9 million from $10.4 million in the same period of 2001, and EPS was 39 cents, compared to 37 cents.

EPS for 2003 is expected to range from $2.58 to $2.66 per diluted share.

In the release, CFO Rodney Carter blamed the declines on the soft economic environment. Carter said he was confident the company's cash flow and low debt level leave it in good shape, but CEO Richard Frank said during the call that the company does not expect a reversal of its sales fortunes this year.

"We see no tangible sign of an economic environment that's improving," Frank said.

Officials hinted that value-focused efforts to draw families to its stores this year may include a chain-wide extension of its single-token test. Many games and rides at Chuck E. Cheese's stores require two tokens for play, but results from one-token tests in Boston, Houston, Los Angeles and Minneapolis have been encouraging.

Store operators also are experimenting with increasing the number of prize-redemption tickets awarded per play.

CEC predicts it will spend some $60 million opening 35 to 40 new stores this year.

Topics: Public Companies

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