Regal Cinemas parent Cineworld Group (CNNW.F) may have filed for bankruptcy (again) last week, but rival AMC Entertainment (AMC 3.96%) isn't in the same dire straits. That's the word from AMC's chief executive Adam Aron, anyway, who tweeted on Wednesday that "AMC is in a very, very different situation." Aron goes on to explain that "retail investors embraced us and let us raise boatloads of cash."
And he's right. His company ended the second quarter of the year with nearly $1 billion worth of cash, and just last month secured the right to issue -- sell -- 483.2 million shares of its newly minted preferred stock, AMC Preferred Equity (APE).
To suggest AMC isn't facing a similar situation to Cineworld, however, may not be entirely accurate. The company is still bleeding money, and after a firm rebound in movie-going this year, consumers' interest in the theater experience is waning again. Labor Day weekend's box office was the worst Labor Day weekend in years, underscoring the tepid ticket sales we've seen since late July.
A sudden, serious slowdown
If AMC Entertainment is in a dramatically different situation than Cineworld, it might be wise for the company to start explaining exactly how. The theater chain remains in the red despite the measurable ticket-sales rebound from pandemic-prompted shutdowns in 2020, and then 2021's slow easing back to normalcy. And bear in mind that AMC was regularly in the red even before the COVID-19 contagion took hold. This is true in terms of operating cash flow and operating income.
Data source: Thomson Reuters. Chart by author.
Yes, things are looking up. Clearly the company isn't booking the sort of losses it was during the shutdowns and shortly thereafter, when people were still a bit hesitant to set foot in theaters. Analysts are calling for slow and steady bottom line progress through 2024 as well.
Take a closer look at the graphic above, though. AMC's net losses and its negative operating cash flow were both worse during the first couple quarters of this year than they were in the past couple quarters of last year. That's true despite much bigger and better box office draws in 2022. For example, Top Gun: Maverick debuted in May, shortly after Doctor Strange in the Multiverse of Madness. The Batman came out in March, with Fantastic Beasts: The Secrets of Dumbledore releasing in April. These movies did well enough in theaters, but AMC Entertainment still couldn't turn this demand into a profit.
Things have taken a dramatic turn for the worse since July's release of Thor: Love and Thunder. That is, ticket sales have plummeted. Even the usually mediocre Labor Day weekend wasn't so hot this time around, with a mere $70 million domestic box office for the four-day weekend, according to numbers from Box Office Mojo. That's still worse than most pre-pandemic weekends, when there were no new releases to entice movie-goers. It's also much less than the $136 million charted during the same holiday period in 2021.
Data source: Box Office Mojo. Chart by author.
Some might argue that the special pricing promotion offered to consumers on Sept. 3 -- the Saturday of Labor Day weekend -- could have crimped total collections at movie boxes. To celebrate National Cinema Day, most U.S. theaters were only charging $3 per ticket for any movie and any showing. It worked ... sort of. Many theaters reported several sell-outs, with 8 million Americans taking in a movie that day.
Deeply discounting the usual price of around $13 per ticket, however, is neither enough to offset slumping ticket sales nor a pricing model with long-term viability. Theaters clearly need splashy blockbusters to sell enough full-priced tickets to remain in business, perhaps even more so now than they did before the pandemic. Labor Day weekend's biggest draw? Top Gun: Maverick, which first came out in May.
Be realistic
I'm not suggesting that AMC is doomed, nor am I suggesting that bankruptcy for AMC is inevitable. As Aron noted, the company has some cash in the bank, and if need be it could sell up to 483 million shares of preferred stock. That could raise on the order of $2.5 billion at its current price.
Such a sale would mean significant dilution of current shareholders' interests, though, and it still wouldn't address AMC Entertainment's more pressing problem. Specifically, it's an operation that was regularly losing money before the pandemic took hold. The pandemic then catapulted several streaming services that have to be taking at least some degree of toll on the theater industry's already-wobbly business.
Bottom line? Adam Aron may ultimately be right about AMC being in a different situation than Regal parent Cineworld. That doesn't, however, inherently make it a stock worth owning. A great number of questions -- too many -- about its long-term survival strategy remain unanswered.
