AMC Entertainment, parent of world’s largest cinema chain AMC Theatres, sent chills throughout Hollywood with a rough second-quarter earnings report that the company largely attributed to a weak summer movie slate.
Early Friday, AMC reported revenue of $1.2 billion and loss of $1.35 a share for the three months ended June 30. That fell well short of the earnings of 24 cents a share the company reported for the same time last year, although revenue topped the $764 million AMC reeled in then, as the company’s now a much bigger chain after multiple acquisitions. Before AMC released updated guidance Wednesday, analysts had estimated revenue of $1.23 billion and a loss of 11 cents a share.
“While we strongly believe AMC is well positioned for the future, and are confident in the long term prospects for AMC to drive revenue and earnings growth, we are nonetheless extremely disappointed by AMC’s financial and operating results for the second quarter of 2017,” AMC CEO and President Adam Aron said in a statement. He pinned much of the blame on a “weaker than anticipated industry box office in the U.S., not expected to strengthen until the fourth quarter of 2017.”
AMC had hoped to soften the blow by releasing updated guidance late Wednesday, ahead of earnings, that blamed a soft summer box office for weaker-than-expected second-quarter performance. The company also announced a cost-cutting plan that involved reducing staffing and hours. AMC attributed a big chunk of the second-quarter loss to a pre-tax impairment charge related to AMC’s investment in theater advertising company National CineMedia, whose market value had declined significantly below the value for which AMC had been booking the investment.
That news summarily sent the company’s stock down 25 percent in after-hours trading. The next day, AMC said that it would be moving up its earnings release from Monday afternoon to Friday morning. And late Thursday, AMC announced a $100 million share buyback program to help bolster its share price. AMC’s stock is down 55 percent year-to-date.
The company also pointed at a weak second-quarter box office — AMC said the U.S. box office gross for that period dipped 4.4 percent compared with 2016 in its Wednesday release — and a third-quarter film slate that also projects to be soft as reasons for its disappointing results.
AMC’s retrenchment is a major shift for what had been one of the entertainment industry’s most aggressive acquirers. Last year, AMC inked billion-dollar deals to acquire U.S. chain Carmike Cinemas and European exhibitors UCI & Odeon and Nordic Cinema, giving the company more than 11,000 screens — but also plenty of leverage. AMC currently has about $4 billion in long-term debt.
AMC’s parent company, China’s Dalian Wanda Group, has also faced financial constraints of its own, as the once-aggressive international dealmaker has pared back in the face of regulatory pressure. Wanda recently sold its theme park business and 77 hotels to other Chinese companies as it works to reduce its debt. AMC issued a statement last month denying that Wanda money was used in for its big theater acquisitions.
“At no time was Wanda ever a source of funding for any of these acquisitions or individual theater purchases,” AMC said in the statement.
AMC will hold a conference call at 10:30 a.m. ET to discuss the earnings.