Regal Entertainment Group has a message for Wall Street: Enough.
Following a month in which its stock has lost more than 22% of its value, the No. 2 exhibition chain says today that it plans to repurchase up to $50 million of its stock — a sign that it considers the shares a bargain.
“We believe our growth prospects and long-term strategy are not reflected by the Company’s recent share performance,” CEO Amy Miles says. “We are pleased that our significant free cash flow enables us to institute a share repurchase program while continuing to reinvest in our asset base.”
The company didn’t provide a timetable for the buybacks.
Investors cooled on Regal and other movie theater chains as they became wary about prospects for the business.
Box office sales in Q2 were far weaker than most expected. Miles told analysts in July that the sales reflected “the commercial appeal of the content.” She added, though, that “the long term box office remains remarkably stable.”
Yet Q3 is also disappointing. Sales this past weekend were the lowest they’ve been since 2001, as theaters grappled with lackluster releases, school re-openings, the Mayweather-McGregor fight, and the flooding in Texas.
The upcoming Labor Day weekend’s domestic sales could be the smallest in 30 years.
FBR analyst Barton Crockett predicts that Q3 will come in 25% lower than the same period last year.
On top of that, many investors want out of exhibition before Hollywood studios introduce premium video on demand — offering movies to home viewers in the 90-day period when theaters traditionally have them exclusively.
Studio chiefs have said that the change is needed so they can cash in on new releases while they’re still fresh in consumers’ minds, and after the first few weeks when they run out of gas at theaters. Exhibition execs say that they might not show movies that they can’t offer exclusively for the 90-day window.
Theater companies say that their box office sales should improve in Q4 when studios serve up stronger releases including Star Wars: The Last Jedi. They add that their investments in recliner seats, large screen venues, and premium concessions will pay off by prompting consumers to dig deeper into their wallets for tickets and snacks.
Many investors are unpersuaded. Short sellers — who bet that a stock’s price will fall — own about 22.8% of Regal’s trading shares, Yahoo Finance reports.