Regal Entertainment’s effort to install recliner seats and high-end concessions helped it to beat analyst expectations for Q1. That lifted its shares nearly 3.6% in postmarket trading, following a 15.3% increase so far in 2016.
This is the first report where the No. 1 exhibition chain says the recliner seats are “getting to a critical mass,” CFO David Ownby told analysts in a conference call. “They’ve been doing well individually. We just haven’t have enough” to make a big difference in the numbers.
Regal reported net earnings of $40.7 million, up 76.2% vs the period last year, on revenues of $787.1 million, up 13.9%. The top line beat analyst forecasts for $771.3 million. Earnings at 26 cents a share also beat expectations by a penny.
“The overall demand for seats, particularly for weekend and weekday primetime shows, has created a pricing opportunity above and beyond our normal inflationary price increases,” CEO Amy Miles says.
Ticket prices at locations with recliners increased in Q1 by more than 13%, “almost twice the increase for the remainder of the circuit,” she says.
They also sweeten concession sales: Increases at recliner locations topped 14%.
Regal has 900 venues with recliners. With plans to convert an additional 1,200 — and open 125 new ones — by end of 2017, “the positive impact will become more evident with each passing quarter,” Miles says.
But the change might reduce the urgency to look for alternative content — including concerts and sports — to help fill seats on weeknights.
“There’s such a high demand for those [recliner] seats for filmed content it’s hard for non-filmed content to compete,” Miles says.
At all of its 7,329 screens, Regal saw Q1 attendance increase 5.3% vs the period last year to 53.3 million. The average outlay for a ticket was up 7.9% to $9.68, and the average ticket buyer spent $4.32 at the concession stand, up 10.2%.
Some of the improvement in concessions was due to a more family-friendly mix of films early this year that resulted in additional candy sales. Last year led off with Fifty Shades Of Grey and American Sniper, “neither of those you’d consider candy-type movies,” Ownby says.
Miles reiterated her opposition to premium VOD or other plans that cut into theaters’ typically 90-day window to have exclusive and first dibs on feature films.
If that’s to change, then “it’s incumbent that exhibition and studios work together.”