As I mentioned yesterday, my wife and I recently planned our son's second birthday party at Motley Fool Hidden Gems recommendation CEC Entertainment's
Finding a good pizza is a relatively simple task, but enjoying it while being serenaded by an eight-foot mouse is a different matter entirely. There is an overabundance of dining options out there, and entertainment, while less plentiful, is still easy to find. The combination of the two, though, forms a carnival-like atmosphere that few kids can resist.
Chuck E. Cheese scurried into this niche long ago and has milked it for as many tokens as will pour out.
The company has found its token cup spilling over lately; fourth-quarter revenues released this morning jumped 17% to $172.1 million. Same-store sales came in 3.1% higher, though an extra operating week deserves much of the credit. Net income for the quarter climbed 43% to $15.6 million, or $0.41 per share, from $10.9 million a year ago. Excluding the extra week, earnings still advanced 17% for the year.
While most players in the crowded casual dining landscape are vying for customers' attention, the bright lights and boisterous noise at Chuck E. Cheese act as a beacon for idea-starved parents looking to provide a safe, fun environment for their kids. Maybe Applebee's
Entertainment may be the hook that keeps the pizza ovens busy, but revenue growth from the playroom easily trumps that in the kitchen. Games-related sales rose 21.3% last quarter -- about a 50% faster clip than the 14.7% increase in food and beverage sales -- and represented exactly one-third of total revenues.
With reasonable valuations, operating margins triple the industry average, and a destination that kids and parents alike are clamoring for, investors who hold these tickets may be in for a treat at the redemption counter.
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Fool contributor Nathan Slaughter misses one of Chuck E. Cheese's earliest attractions -- the "Mouse Hole." He owns none of the companies mentioned.