Things are going about as well as a dirty diaper in a ball crawl for Chuck E. Cheese parent CEC Entertainment
CEC is now looking to earn between $0.43 and $0.47 a share in its September quarter. This comes less than two months after the company warned that a poorly received promotional campaign would find those same earnings clocking in between $0.56 and $0.61 per share.
The company blamed the botched summer promotion, higher gas prices, and "to a lesser extent, the loss of store operating days resulting from Hurricane Katrina" for the shortcoming.
Last night's headlines were fairly predictable:
"CEC Entertainment lowers 3Q forecast due to Katrina," read Dow Jones'
"CEC Cuts 3Q Outlook on Storm, Weak Sales," read the Associated Press.
As expected, the Katrina impact that CEC tried to play down in its release gets a starring role on the financial journalism marquee. Then again, it probably didn't help that CEC buried the downgrade in a press release entitled "CEC Entertainment, Inc. Reports Initial Impact of Hurricane Katrina on Operations."
At least Reuters
Yes, comps are down by 5% through the first 10 weeks of the quarter, and the company has suffered a combined total of 128 days of closed units at 17 stores that were affected by the storm. However, CEC was careful to say that the shortfall would have happened with or without Katrina.
Obviously, a closed store is going to ding results, but CEC already had the recipe in place for a bad summer with its inane Super Chuck Summer promotion that pitched kid meals as an economic value -- on kid shows. It was a total fiasco, with initial results showing that less than 1% of the company's total sales were coming from the new $4.99 promotion.
It's not just kid-gaming havens that have floundered. On the grown-up side, Dave & Buster's
In the long run, you have to like CEC. This is a company that has done what Discovery Zone, Disney's
CEC was recommended to our Motley Fool Hidden Gems subscribers earlier this year. The stock hasn't been a rewarding experience thus far, and has surrendered 12% of its value since being singled out. Thankfully, the average newsletter pick has nearly tripled the S&P 500's return.
So don't mind the dirty diaper. Hold your nose and hope for the best.
Longtime Fool contributor Rick Munarriz really does go to his local Chuck E. Cheese with his two sons from time to time. He realizes that most of the ball crawls have been replaced with overhead crawl tubes, but he just loves the way "ball crawl" rolls off the keyboard. He owns shares in Disney and is part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.