Theater chain AMC’s stock plummets 25% as weak Hollywood box office weighs on earnings
AMC Entertainment Holdings, the world’s largest movie theater owner, took a big hit on Wall Street after it reported worse-than-expected earnings amid an unusually weak box office.
The Leawood, Kan., company, owned by struggling Chinese real estate conglomerate Dalian Wanda Group, told investors it is cutting costs to offset declines in theatrical attendance.
Shares fell more than 25% to $15.30 in after-hours trading. The company reported preliminary earnings after the close of trading Tuesday.
AMC reported a loss of up to $178.5 million, or $1.36 a share, in the three months ended June 30, well below the 3 cents a share loss predicted by analysts, according to FactSet. It’s also a major swing from the $24 million in profit a year earlier.
Industrywide box-office sales for the quarter dropped 3.3% from a year earlier, the company said. The box-office downturn also weighed on recent second-quarter earnings from Regal Entertainment Group and Imax Corp.
AMC’s net loss included a $202.6-million impairment charge tied to an investment in cinema advertising company National CineMedia.
The third quarter is expected to give little relief to theater owners, with AMC calling it “very challenging.”
AMC said in a statement it expects to achieve $30 million in “cost savings and revenue enhancements” through the end of 2017, including reduced staff and operating hours. The measure will affect its Kansas-based Theatre Support Center and AMC’s domestic theaters.
AMC said its initiatives will include “strategic pricing” and “promotional incentives” but did not provide details.
The box-office struggles come as AMC’s largest shareholder, Beijing-based Wanda, in response to government scrutiny, is unloading assets and pulling back on its aggressive strategy to become a major player in Hollywood. Wanda, which paid $2.6 billion for AMC in 2012, also owns Burbank production company Legendary Entertainment.
AMC last month said it did not rely on funding from Wanda to complete major recent acquisitions, including U.S. rival Carmike Cinemas and two major European chains. The statement was in response to reports that the Chinese government was clamping down on borrowing by Wanda to finance acquisitions.
Shares closed Tuesday at $20.80, up 2%, before the earnings were released. The stock has dropped 38% this year.
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