AMC Entertainment (NYSE:AMC) saw a steep decline of nearly 8% on Thursday, reflecting the ongoing turmoil in the movie industry due to twin Hollywood strikes, culminating in the theater chain reporting a larger-than-expected quarterly loss.
Impact of Hollywood Strikes
The ongoing strikes by writers and actors have significantly hampered the movie industry, resulting in a dearth of releases following the summer hits “Barbie” and “Oppenheimer.” The delay in the release of the “Dune” sequel further exacerbated the box-office weakness experienced last year.
Financial Results and Analyst Expectations
AMC reported a loss of 83 cents per share for the fourth quarter, surpassing analysts’ expectations of a loss of 70 cents, as per LSEG data. The lingering impact of the strikes is anticipated to continue affecting earnings throughout 2024.
CEO’s Insights
Adam Aron, CEO of AMC, highlighted the challenge posed by the strikes, which came just as adjusted core earnings were rebounding to pre-COVID levels in the summer of 2023. The industry paralysis has temporarily hindered AMC’s earnings trajectory in 2024.
Adaptation to New Revenue Streams
To counteract the dearth of new content, studios have explored alternative revenue avenues such as concert-based movies. AMC’s partnerships with artists like Beyoncé and Taylor Swift have proven beneficial, providing a lucrative revenue stream. However, the higher distribution costs associated with these concert movies have weighed on earnings.
Box Office Performance
Domestic box-office collections saw a significant decline, with a 35% decrease in the fourth quarter compared to pre-pandemic levels in 2019 and a 45% drop for the first two months of the year compared to 2020 levels.
2024 Outlook
Analyst Eric Handler from Roth MKM predicts a 7% decrease in the overall domestic box office for 2024 due to the six-month Hollywood work stoppage, signaling continued challenges for AMC and the broader movie industry in the year ahead.
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