Marcus Corp., which runs the fourth-largest movie theater circuit in the U.S., posted fourth-quarter results below Wall Street forecasts, but execs point to brighter days in the next few months.
“If the film schedule holds,” CFO Doug Neis said during a conference call with analysts, “we have much higher hopes that we’re going to have a real summer season.” He noted an encouraging move by Sony, which bucked the tide of films being pushed out of the summer, with Peter Rabbit 2 shifting to May 14 from a prior release date in June. Even if grosses don’t return to 2019 levels, he said, the dormancy of 2020 will be in the past.
Revenue plunged 82% in the quarter ending December 31, to $36.7 million, and adjusted net losses reached $1.22 compared with a year-ago profit of 33 cents a share. The consensus forecast by analysts called for revenue of $62.8 million, and it anticipated a net loss of $1.17.
Stronger-than-expected grosses for Tom & Jerry are extremely encouraging given the family profile of the film, according to CEO Greg Marcus. Market research conducted during the coronavirus pandemic showed “the people who were the least comfortable were women,” Marcus said. “The worry was ‘uh-oh, they bring the families.’ And so to see them come back, that’s really encouraging.”
Box office “interest,” as the company’s earnings release put it, for The Croods: A New Age, Wonder Woman 1984, and The War with Grandpa in the fourth quarter also point to family confidence in moviegoing.
Investors seemed to embrace the commentary more than they fretted about the quarterly numbers. Shares in Marcus entered the last half of the trading day up 1% to $20.68. Gains in recent days have returned the stock to its highest levels since the pandemic started sweeping across the U.S. in March 2020.
As other exhibition execs have, Marcus pointed to the bonanza of ticket sales in China last month as an indication of pent-up demand. Another tailwind for U.S. movie theaters, he said, will be the fact that summer music festivals and tours will still be on hold, reducing the number of entertainment options.
The company also is poised to step in and operate distressed movie theaters as operators abandon leases or seek an exit from the sector in certain markets, Marcus said. Similar to Cinemark, Marcus has taken a conservative approach to capital and has survived Covid-19 with more resources than many other exhibitors. It ended 2020 with $227 million in cash and revolving credit.
“There might be some opportunities ahead” to take over leases or consider acquisitions, Neis said, “in ways that make sense.” Marcus currently has only one theater in its portfolio that it manages for other owners, but Greg Marcus noted his grandfather built the company’s theater business in part through opportunistic third-party management. In the mid-20th century, Marcus took over theaters amid the rise of television, when “there was a lot of displacement.” A reprise during the Covid-19 recovery is possible, he said, especially with billions of dollars at stake for studios and theaters.
Milwaukee-based Marcus company also operates a number of hotels, restaurants and bars. While Neis bluntly described 2020 as “the worst year in our 85-year history,” execs noted some encouraging signs in the fourth quarter. Hotel occupancy of 24% is “nothing to get too excited about,” Marcus said, but he noted that reopening most of the company’s portfolio yielded better results than keeping shut. As leisure travel ramps up and the country nears the expected point in late-May of vaccines being available for all Americans, Marcus says the company will be poised to benefit.