What happened
Shares of AMC Entertainment (AMC 52.00%) are falling 4.4% at 11:32 a.m. ET on Tuesday on no company-specific news. But Walmart did send a tremor through the market today, causing the Dow Jones Industrial Average to tumble almost 200 points. Still, that's less than a 1% decline for the index.
But with fears of a recession gripping the market and the retail giant saying consumers are cutting back on their discretionary spending, the movie theater operator may be a bigger target for a sell off than usual since it survives based on how many leftover dollars consumers have that they're willing to spend at the cinema.
So what
Walmart warned profits will be soft in the second quarter and for the full year as the dreaded R-word gets bandied about. Expectations that a second straight quarter of economic contraction will have a recession declared are high, which would make for a difficult period for AMC.
So far it's been doing well for itself because consumers have been hungry for the big screen experience, yet theater attendance this year is still down compared to pre-pandemic levels. And that's a trend that was evident long before the coronavirus pandemic.
Now what
AMC was able to raise a substantial amount of cash during the pandemic, so it has a cushion available. However, the theater operator has chosen some dubious projects to spend the money on, such as investing in a defunct gold and silver miner.
Investments in its theaters are always welcome, and AMC has done that too, but competition from streaming services will continue to be a thorn in its side, especially if a recession makes less discretionary income available in consumer wallets.
