After losing $2B, AMC Theatres will survive but only after difficult cuts, CEO says
Last year, AMC Theatres CEO Adam Aron said executives “agonized” over eliminating 50 positions in the name of efficiency. By comparison, the Leawood-based company furloughed 35,000 employees this March as it turned the lights out at movie theaters around the globe.
“We knew with certainty that there simply was no other choice,” Aron told investors on Tuesday.
It was among several drastic measures taken since AMC’s revenues dried up alongside its March theater closures. And on Tuesday, Aron signaled it was just the beginning of deep cuts that will be necessary to keep the company afloat.
AMC already had furloughed every corporate employee, cutting salaries at headquarters by 20 to 100%. It also eliminated non-healthcare benefits like 401(k) matching and has sought to defer or renegotiate movie theater rents with landlords.
“The company is taking big, bold action and doing so swiftly,” Aron said.
On Tuesday, AMC reported a loss of $2.17 billion for the first quarter of 2020. Executives last week warned investors of “substantial doubt” about the company’s ability to continue through the coronavirus pandemic as it previewed its earnings.
But this week, the CEO projected confidence in the future of the nation’s largest movie theater chain.
“In my heart of hearts, I passionately believe that in the end AMC will both succeed and prosper,” he said.
Still, he acknowledged the many uncertainties ahead. He said demand will be limited not only for venues like movie theaters, but within the economy at large.
Asked by an analyst whether the company planned to make long-term cuts like downsizing its Leawood headquarters, Aron said the company is looking to cut hundreds of millions of dollars in spending.
“This isn’t just about whether we need less office space at our headquarters. We’re going to have to run our company more efficiently, at our theaters, in our headquarters,” he said. “We’re going to have to cut labor cost. We’re going to have to cut non labor cost. And the management team here does not have small targets or small aims. We’ve got to balance our costs with our revenues to the extent that it’s possible. And we’re on the case with big targets in mind.”
AMC employs some 400 people at its corporate headquarters, according to the Kansas City Area Development Council.
While it temporarily suspended operations at all domestic and international theaters, AMC recently reopened 10 theaters in Norway, Germany, Spain and Portugal. It will start opening screens in Italy next week.
With plans of reopening most theaters by the end of July, the CEO said he told local theater managers to be ready to “open on a moment’s notice.” He said most screens will reopen ahead of the July 17 release of “Tenet” and the July 24 release of “Mulan.”
The company plans to limit theater capacity, block off seats and upgrade air filtration and sanitation methods. Executives said they have sought guidance from public health experts at Harvard University and partnered with The Clorox Company to help create a safe environment for guests and employees.
With 8,000 screens in the United States, the CEO said, the company has great flexibility in spreading out moviegoers. The average domestic location has more than a dozen screens and can show the same flick in multiple theaters if demand warrants. Movie theaters have never had the same pressure to fill every last seat as industries like airlines or professional sports teams, he said.
“At AMC, we sold 17% of our seats last year,” Aron said. “If there’s anybody who can get through this social distancing, seat blocking, capacity limitation thing, it’s our industry.”
He said the chain will look to permanently close the least profitable of its 635 U.S. locations, though even with closures AMC would likely maintain its status as the nation’s largest theater operator.
In April, AMC announced plans to raise $500 million in a private debt offering as speculation of a possible bankruptcy reorganization swirled. Aron said a full recovery could take months or years, but he said the 100-year-old brand was well positioned to not only capitalize on pent-up demand but to survive the pandemic.
“We will do everything in our power to make sure that this company thrives and prospers,” he said at the end of Tuesday’s call. “With that, see you at the movies.”
