Texas Business Report: Chuck E. Cheese’s Ad Campaign Flops

The chain's parent company's strategy of investing more in a digital media campaign targeting moms seems to have backfired, with profits dropping 33 percent. 
Sat November 3, 2012 1:05 am

The Texas economy is one of the most robust in the world. Wildly profitable companies and ingenious entrepreneurs call this state home, and what happens here influences businesses around the nation. Here’s a slice of the profits, losses, big deals, and backroom decisions happening across Tex as this week.

Bad Luck Chuck
Despite getting an  image makeover  earlier this year, Chuck E. Cheese is struggling to draw a crowd. The  Dallas Morning News  reported this week that Irving-based CEC Entertainment, parent of Chuck E. Cheese’s restaurant chain,  saw profits decline by 33 percent last quarter , down to $7.8 million from $11.7 million in the same period last year. CEC is attributing the slowdown to “a significant reduction in kid’s television advertising” in favor of “a digital media advertising campaign targeting moms.”

The Bottom Line:  CEO Michael Magusiak acknowledged in a statement that the shift in the company’s marketing strategy may have backfired: “In retrospect, we believe we reduced media weight levels too deeply, which negatively impacted sales.”

State of Confidence
Texans are pessimistic about the trajectory of the U.S. economy but have a (slightly) rosier outlook for business growth in their home state . In a newly published poll, the University of Texas and the Texas Tribune found that 42 percent of respondents believe the national economy is worse than it was a year ago—“including 23 percent who said the economy is a lot worse off.” Thirty-two percent said the U.S. economy has improved since 2011, and 25 percent said it is about the same.

Turning to Texas, just 21 percent of polltakers said the state economy has worsened, while more than half said it is about the same as it was last year and 25 percent thought it has improved.

The Bottom Line: The survey also indicated that Texans’ perceptions of the country’s direction are colored by their political affiliations. “Democrats said the country is going in the right direction — and by a wide margin,” the Tribune reports, while “Republicans were strongly negative.” Interestingly, the reverse was true when participants were asked to evaluate Texas’ situation: Republicans were positive about the state’s direction while Democrats were more pessimistic.

Refine and Dandy
Texas oil companies are riding the coattails of a nationwide resurgence of refineries this year. Irving-based Exxon Mobil beat analysts’ expectations for the third quarter as its “profit from refining oil at U.S. plants soared 78 percent to $1.4 billion,” Bloomberg reports. However, the company’s performance overall is not so positive, with profits falling by seven percent in the quarter due to a decline in production internationally and a 29 percent drop in natural gas prices.

Meanwhile, Houston-based Phillips 66 reported strong third-quarter results this week, including a 52 percent profit increase, according to Businessweek.

The Bottom Line: U.S. oil refineries are booming due to “surging U.S. crude output, which has depressed prices and allowed the companies to save on every barrel they process,” Businessweek reports. The margin between the low cost of crude and the rising price of fuel is the largest it’s been since 2005, growing by nearly seventy percent since last year.

Winner of the Week: Cal-Maine Foods
Amid all the hubbub about Houston’s energy sector, southeast Texas’ booming egg trade rarely gets a moment in the spotlight. But that could soon change, as the nation’s largest egg producer is ramping up its presence in the region, including a plan to buy space for 3.5 million hens from Boling-based Maxim Production Company in November, the Associated Press reports. Cal-Maine Foods Inc., which is headquartered in Mississippi, also bought the Texas operations of poultry producer Pilgrim's Pride for $18.8 million in August.

Loser of the Week: The Astros
The Houston Astros’ plan to reveal a new logo, uniforms and mascot at a sold-out party on Friday hit a snag this week when the logo was leaked to the public twice — and one of the offenders was the team’s own website. Academy Sports + Outdoors mistakenly put out some of the new merchandise for sale at its Houston stores last Friday, and then hastily removed it when it became aware it had jumped the gun, the Houston Business Journal reports.

Then on Tuesday, “a small portion of the Astros’ new identity” was leaked on the team’s site , which is overseen by Major League Baseball. The league apologized via Twitter , cryptically blaming the leak on Hurricane Sandy: “MLB Advanced Media, in advance of super-storm Sandy, inadvertently posted photos of players in their new uniforms on @Astros.com bio pages.”

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