I did something irrational around the holidays that had nothing to do with slicing open a fruitcake or joining a gym. I bought shares in a struggling company that is widely loathed. I bought into the only theme park operator to post a decline in attendance this past quarter, one where incoming guests are often greeted by protestors standing just outside the parking lot entrance with signs objecting to keeping orcas and dolphins in captivity.
That's right. I am now a SeaWorld Entertainment (NYSE:SEAS)shareholder.
No matter where you stand on the SeaWorld debate, that very statement of mine probably makes you passionate.
How dare you, Rick? Did you see Blackfish? How would you like to spend the rest of your miserable life swimming around in a bathtub? Google the name Dawn Brancheau you greedy and insensitive capitalist!
Way to go, Rick! Ignore the zealots that are only listening to one side of the story. You have taken the time to research all that SeaWorld actually does for marine life preservation and education. You are standing up to the activists, and in appealing to my inner Ayn Rand, I now want to marry you and make babies that we will take to SeaWorld every other weekend.
I respect both sides of the argument, but I prefer to split the difference. I am not really in favor of keeping killer whales in restrictive habitats for entertainment purposes. I have argued in the past that there is more to gain by being less controversial. However, that idea is inspired more in the spirit of just good business than any possible activist pangs.
That is ultimately why I bought into SeaWorld two months ago. The stock had fallen to the teens in a wave of tax-loss selling, and I sensed a turnaround opportunity for a broken IPO -- it had gone public at $27 a share in early 2013 -- with a fat dividend.
Sinking to new depths
SeaWorld posted another quarter of horrible results on Thursday. Revenue slipped 3%, but analysts were holding out for a bigger top-line drop. Attendance dipped 2.2%. Admissions per capita declined 1.9% despite hiking some of its ticket prices last year, a worrisome indicator that suggests heavy discounting to get folks through the turnstiles.
The fourth quarter is a seasonally sleepy period for the theme parks industry, but an adjusted loss of $0.21 a share was worse than the prior year shortfall and what Wall Street pros were targeting this time around.
SeaWorld was the last of the amusement park operators to chime in this earnings season, and it is not a surprise to see it as the only player swimming the wrong way. The other publicly traded purveyors of whimsy posted top-line increases between 9% and 30% for the holiday quarter, fueled by new attractions and the growing popularity of their Halloween and Christmas events.
This should be a great time to be running a theme park. The economy is improving. Gas prices are low. Your kid is tall enough to ride that coaster that you always wanted to share. However, SeaWorld has now clocked in with back-to-back years of 4% declines in attendance.
I became a shareholder during the last week of 2014, because I think SeaWorld will get it right someday. It will eventually realize that marquee rides and richly themed experiences are what drive traffic, and that is what separates SeaWorld from the ride-less dinosaurs that line my home state of Florida like Theater of the Sea, Miami Seaquarium, and the now defunct Ocean World.
SeaWorld does not see it that way. The company is phoning it in this year outside of a new coaster going up at Busch Gardens Williamsburg. It recently went through hundreds of layoffs, and its biggest projects for 2015 outside of the new coaster are mere updates to existing show sets. That is obviously not going to get the job done.
The one thing Seaworld could get right this year is a brand-restoring marketing campaign that it plans to roll out in a few weeks. Attempts to get its side of the story out since Blackfish have fallen as flat as its financial performance. There is also a new CEO that will hopefully rattle the company like a toddler shakes up an Etch-a-Sketch.
I can wait, collecting chunky dividend checks along the way. I did not invest in SeaWorld as a political statement. I am just a guy that enjoys theme parks and can appreciate turnaround stories before the companies themselves see them happening. I trust you will find that more opportunistic than offensive and at some level, realize that it is easier to be heard from the inside than picketing from the outside.