AMC Theatres Slashes Costs to Deal With Box Office Slump, Stock Plunges 25 Percent

The world’s largest theater chain announced cost reductions and provided updated quarterly guidance

amc theatres
AMC Theatres

AMC Theatres, which is owned by China’s recently embattled Wanda Group, announced plans to cut costs and “enhance” revenues in a Tuesday filing as the world’s largest exhibitor contends with a box office slump, which sent its stock plummeting 25 percent in after-hours trading.

Despite the success of superhero tentpoles like Warner Bros. “Wonder Woman” and Disney’s “Guardians of the Galaxy Vol. 2,” the second-quarter box office was down 2 percent compared with 2016. And without a lot of sure bets hitting theaters in the following three months, AMC has decided to make moves to deal with what it projects to be a softer gate.

“Against the U.S. industry backdrop of a weaker than anticipated second quarter and estimates for a very challenging third quarter, the company has embarked on a domestic cost reduction and revenue enhancement plan to better align operating expenses with theatre attendance in its markets and reduce general and administrative costs for the balance of 2017 and into 2018,” AMC said in its release.

AMC said it expects its cost savings and revenue enhancement plan to result in a gain of $30 million in adjusted earnings before interest, taxes, depreciation and amortization, a common metric measuring a company’s profitability, through the end of the year. That plan “will include strategic pricing, promotional incentives, adjusting scheduling practices, reductions in operating hours, staffing levels, and additional general operating expense line items,” and will affect AMC’s main support center in Kansas as well as domestic cinema locations.

AMC parent Wanda has dealt with a cash crunch of its own, recently disposing of its theme park business and 77 hotels as it works to get its debt level under control — and appease Chinese regulators, who have cracked down on cross-border deals. Last month, AMC denied that its string of recent cinema company acquisitions, including that of European chain Nordic Cinema Group, depended on Wanda financing.

The company also shared some second-quarter earnings guidance, projecting revenue between $1.2 and $1.204 billion and a net loss of $1.34 to $1.36 a share, owing mainly to a pre-tax impairment charge from its investment in National CineMedia.