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CEC Shares Slip on Chuck E. Cheese

CEC Entertainment shares fall as the Chuck E. Cheese operator lowers earnings guidance .

IRVING, Texas (

TheStreet

) -- Shares of

CEC Entertainment

(CEC)

plummeted nearly 10% Friday morning after the operator of Chuck E. Cheese's restaurants forecast earnings below Wall Street's expectations.

CEC Entertainment said late Thursday it now expects to earn between $2.52 and $2.62 per share in 2010, down from its previous guidance for earnings of $2.70 to $2.80 per shares. Analysts' consensus call is for earnings of $2.83 per share.

Sterne Agee lowered its EPS estimate by 17 cents to $2.66 for 2010, and by 11 cents to $3.00 per share for 2011, based on the expectation for lower same-store sales. The brokerage firm maintained its buy rating on CEC shares, however, noting the company's dominant market share position in the child entertainment segment.

CEC booked profits of $4.8 million, or 22 cents per share, in the three months ended July 4, compared with year-earlier earnings of $9 million, or 39 cents per share. The company said a 2% decrease in revenue, to $181 million, and a 2.2% dip in comparable same-store sales, reflected reduced discounts on many of its coupon offers.

"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," CEO Michael Magusiak said on a conference call with investors and analysts.

He added that the popularity of kids' movies, such as

Toy Story 3

and

Shrek Forever After

, kept families out of Chuck E. Cheese's restaurants during the quarter.

Management said conditions are improving, with same-store sales rising 2.1% in the first four weeks of the current quarter thanks to modified coupon strategies. The company expects positive same-store sales in the second half of 2010.

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Domino's Pizza

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, which rivals CEC's Chuck E. Cheese's restaurants in the fast-casual pizza space, disappointed investors recently with comps growth of 8.8% in its recent quarter. Analysts had expected the key metric to come in around 10%.

>> Domino's Comps Not Tasty Enough

With the economy still very much in recovery mode and the jobs market stubbornly weak, consumers continue to be choosy about how they spend their limited discretionary funds. For fast food and fast-casual restaurant chains, that means the competition is stiffer than ever.

CEC shares were 8.8% lower in morning trading in New York, off earlier lows.

Separately, CEC said Friday it tapped Tiffany B Kice, formerly of

KPMG

, as its new executive VP, CFO and treasurer, effective August 16.

-- Reported by Miriam Marcus Reimer from New York.

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