AMC’s Formula for Success: More Theaters, Increased Prices, Fewer Shows

CEO Adam Aron is happy to be king on his planet of the "Apes," but optimism and the Reddit traders can only take him so far.
Photo by: STRF/STAR MAX/IPx 2021 3/5/21 Movie Theaters in New York City reopened today at 25%, capacity after months of being closed due to the Coronavirus pandemic.
An AMC location in NYC

AMC Entertainment chairman and CEO Adam Aron is positive and combative even when financial news is bad. When his August 9 second-quarter earnings report beat revenue expectations — the losses weren’t as bad as anticipated — he sounded nearly ebullient.

The call included elevated participation from the “Apes” — AMC’s fervent and so-called meme shareholders who propelled the stock’s nearly 1,500 percent rise in 2021. (Wall Street wasn’t particularly impressed, with stocks falling over 6 percent to close at $31.75 August 10.)

The optimistic Aron knew better than to declare victory: “AMC’s journey through this pandemic is not finished, and we are not yet out of the woods,” he said in a statement. “However, while there are no guarantees as to what the future will bring in a still infection-impacted world, one can look ahead and envision a happy Hollywood ending.”

It is no small victory that AMC is now at the point where survival can be envisioned. It was an embattled organization that faced bankruptcy speculation even pre-Covid. Aron’s leadership, which included heavy borrowing to improve liquidity, held off the wolves. The future repayment burden looms, although Aron said key debt isn’t due until 2023 and most of it not until 2026. As to how AMC might get there?

Increased prices, decreased showtimes

A full-price AMC ticket is averages $10.50 nationwide, reflecting a 50-cent increase. Concession prices also increased. Theaters usually prefer to downplay price hikes, but Aron touted them in a move to raise investor confidence. Similarly, he recognized the benefit of significantly reducing the number of showtimes. Rather than operate seven days a week, with matinees starting at noon or earlier and the last show starting around 10 p.m., the last show at many locations now starts around 8 p.m., Sunday through Thursday.

AMC Theatres is photographed by Michael Buckner during the latest lockdown due to the rising cases of Covid-19 on December 7, 2020 in Burbank, California.
The AMC Burbank 16Michael Buckner for Variety

AMC Apes are heroes and handicaps

AMC stock has become a darling of nontraditional traders who rally around struggling companies and like to cause headaches for short-sale investors. It’s a quirky hobby, but the Apes have been key to AMC’s rebound and Aron allotted nearly all of the post-statement Q&A to inquiries from shareholders. (Financial analysts got in one question at the end.)

The Apes hold a lot of power. Last month, when Aron raised the possibility of selling more shares in the company to raise cash, they howled in protest. (Some traditional shareholders did as well.) Aron backed down from the plan. However, when an Ape on the earnings call asked about possibly elevating or repurposing theaters into family entertainment centers, Aron pointed out that promising ideas like these are capital intensive — which is why he wanted to raise more capital through shares. That subtle dig made a point.

More acquisitions likely

AMC’s acquisitions of the Pacific Grove 14 and the Glendale 18 in Los Angeles will reopen later this month. Both are strong theaters, although they declined substantially in 2019 and are no longer among the region’s top 10. Aron said AMC is working on up to eight additional locations, including at least one additional theater in the Los Angeles area, two in Chicago, and one in Atlanta.

He didn’t reveal the locations, but the Chicago area has two closed Arclights (in the city and in suburban Glenview, neither profitable) as well as the Cinemark-vacated Evanston 18.

Optimism only goes so far

Aron hopes to be cash-flow positive by Q4 2021, based on the belief that the domestic box office will gross $5.2 billion for the year. A little back-of-envelope math: The year to date represents about $1.78 billion. That leaves just over 20 weeks to earn $3.4 million. On a weekly basis, that averages out to $170 million.

No week this year grossed $170 million. There have been two weeks that exceeded $140 million, the best one being July 9-15 when “Black Widow” provided the majority of the $165 million total. In 2019, when the total gross for that 20-week period was just under $4 billion, only 10 weeks exceeded $170 million.

Overly optimistic? Yes. But hope and Apes spring eternal.

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