AMC Has Too Many Screens: Insiders

AMC Entertainment’s (NYSE:AMC) revitalization plan hinges on adding new theaters, but former Regal Entertainment CFO David Ownby told Jefferies there are too many screens in North America.

Box office experts agree that moviegoing is not going to disappear. The pastime is inexpensive, enjoyable and can drive billions of dollars in ticket sales. In the last two weeks, the domestic box office has set ticket sales records for the pandemic era, a welcome sign of recovery for the industry.

It’s a particularly promising signal for AMC, which raised around $2 billion in cash over the last six months and plans to use some of the fresh funds to acquire more theater locations. Its best-case scenario is that the public will continue to turn out to see films on the big screen, and with more market share, AMC will reap the benefits of those ticket sales.

As AMC moves to add more theaters, it’s searching for high-performing locations that were abandoned during the pandemic, it may also need to shed some of its underperforming cinemas.

Speaking with Jefferies, Ownby said America is "over-screened." Before the pandemic, there were around 40,000 screens. The bottom 15% of those locations generated only around 5% of the box office, Jefferies said in a research note Monday.

Ownby, who worked for Regal from 1999 to 2018, suggested that a healthy screen count would be 32,000 to 35,000.

His thesis matches others in the industry who have noticed a decline in moviegoing even before the pandemic. These analysts foresee that trend continuing.

AMC shares gained $3.48, or 6.3%, to $58.49.