AMC’s third quarter results highlight management thinking outside the box

0


AMC Entertainment Holdings (NYSE: AMC) released its third quarter results on Nov. 8, and the announcement underscored that management was considering manner outside the box.

Encouraged by a group of non-traditional shareholders, CEO Adam Aron is considering several surprising ways to add additional income to his core film business. While some of the ideas seem far-fetched, they offer the potential to be successful if any one of them actually works. Let’s take a closer look at some of these options.

Image source: Getty Images.

Management becomes creative

During the company’s third quarter conference call, Aron announced that AMC is growing significantly in the popcorn business. What is different now is that the chain wants to sell its popcorn outside its theaters. Aron explained why he thinks the move will be a success:

AMC enjoys two important advantages in this regard. First, our brand, AMC Theaters Perfectly Popcorn, is credible. After all, our company has been selling popcorn for 101 years. And on a peak day, we’re already selling some 50 tons of stuff. And I’m asking you, is there anything that tastes better than real movie theater popcorn? Is there anything that tastes better than AMC’s popcorn?

In fact, in the third quarter, AMC reported $ 265 million in food and beverage sales. These sales cost relatively little of $ 43 million. To put those numbers into context, the company had an aggregate revenue of $ 763 million and lost $ 224 million in net income. So it’s no surprise that the CEO wants to expand into the most profitable segment of his business.

Almost in the same breath, the CEO mentioned that the company is in talks with studios to create non-fungible tokens (NFTs). Assets are growing in popularity and AMC is trying to figure out how to ride that tailwind.

Another idea that AMC is considering is to launch its own cryptocurrency. Here is what Aron said about cryptocurrencies on the company’s conference call: “I can confirm today that we have been exploring with third parties over the past few months both how we can accept them. cryptocurrencies and whether it is possible for AMC to even consider launching our own cryptocurrency. . ”

Does any of these ideas have a chance to succeed?

AMC has had great success selling very expensive popcorn in its theaters. Perhaps this success has led management to believe that the company offers popcorn with a unique good taste. However, people visiting an AMC theater are not allowed to bring food inside. So maybe AMC has delicious popcorn, or maybe people are buying it because there is no other choice. The company will find out soon enough.

In my opinion, the ideas of NFT and cryptocurrency actually have more merit. AMC is building a loyal following among a new class of investors. The shareholders are strong supporters of AMC, ready to buy and hold the shares despite the company’s financial difficulties. As of its last quarter, AMC has $ 5.5 billion in debt on its balance sheet and has lost money on bottom line in five of the past 10 years.

NFTs and a cryptocurrency could be another way for management to capitalize on their strong fan support. This can be a way to create assets that cost the business little money and that it can sell at substantially high margins.

Overall, AMC management has done a great job throughout the pandemic. He apparently used every tool at his disposal to keep the company from running out of cash when closing theaters – to a point where it is now going on the offensive with ideas from Moonshot. As for their chances of success? It’s certainly hard to say at this point, and it may depend primarily on the willingness of loyal AMC fans to support these efforts.

This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are heterogeneous! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.


Share.

Comments are closed.