UPDATE 2-CEC Entertainment Q2 profit misses est; cuts EPS view

Thu Aug 5, 2010 6:25pm EDT

* Q2 adj EPS $0.35 vs est $0.45

* Revenue misses estimates

* Cuts 2010 earnings outlook

* Shares fall as much as 10 pct (Adds conference call details, updates share movement)

Aug 5 (Reuters) - CEC Entertainment Inc CEC.N reported quarterly results that missed market expectations, as sales got hit after it reduced discounts on many of its coupon offers in a highly promotional environment, and the company cut its 2010 earnings outlook. Shares of the company fell as much as 10 percent in extended trade.

"We believe our pricing strategy to reduce coupon discounts at a time when the economy not only did not improve but may have in fact softened somewhat hurt our topline," Chief Executive Michael Magusiak said on a call with analysts.

The number of the coupon redemptions fell by about 7 percent in the first two months of the second quarter and 13 percent in June, and a portion of the reduced number of redemptions hurt guest counts, CEO Magusiak said.

Strong box-office receipts for family movies, led by Toy Story 3 and Shrek Forever After during the quarter also kept customers away from the chains. The company, however, said certain coupon strategies have been modified in July and it expects positive same-store sales in the second half of 2010.

Same-store sales rose 2.1 percent in the first four weeks of the third quarter.

CEC Entertainment, which owns the Chuck E Cheese's restaurant chain, forecast earnings of $2.52 a share to $2.62 a share for fiscal 2010, down from its prior view of $2.70 a share to $2.80 a share.

Analysts on average were expecting earnings of $2.83 a share, according to Thomson Reuters I/B/E/S.

The company, which competes with larger rivals Domino's Pizza Inc (DPZ.N) and Yum Brands Inc's (YUM.N) Pizza Hut, earned $4.8 million, or 22 cents a share for the second quarter, compared with $9.0 million, or 39 cents a share, a year earlier.

Excluding items, it earned 35 cents a share, according to Thomson Reuters I/B/E/S.

Revenue fell 2.1 percent to $181.0 million.

Analysts on average were expecting earnings of 45 cents a share, before items, on revenue of $191.4 million, according to Thomson Reuters I/B/E/S.

Shares of CEC fell $3.55 to $31.00 in post-market trade. They closed at $34.55 Thursday on the New York Stock Exchange. (Reporting by Renju Jose in Bangalore; Editing by Maju Samuel)

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