Marcus Corporation (NYSE: MCS) reported Q1 EPS of ($0.29), $0.11 better than the analyst estimate of ($0.40). Revenue for the quarter came in at $159.46 million versus the consensus estimate of $139.79 million.

First Quarter Fiscal 2020 Highlights

• Total revenues for the first quarter of fiscal 2020 were $159,460,000, a 6.2% decrease from total revenues of $170,039,000 for the first quarter of fiscal 2019.
• Operating loss was $22,200,000 for the first quarter of fiscal 2020, compared to operating income of $4,950,000 for the prior year quarter.
• Net loss attributable to The Marcus Corporation was $19,352,000 for the first quarter of fiscal 2020, compared to net earnings attributable to The Marcus Corporation of $1,860,000 for the same period in fiscal 2019.
• Net loss per diluted common share attributable to The Marcus Corporation was $0.64 for the first quarter of fiscal 2020, compared to net earnings per diluted common share attributable to The Marcus Corporation of $0.06 for the first quarter of fiscal 2019.
• Adjusted net loss attributable to The Marcus Corporation was $8,837,000 for the first quarter of fiscal 2020, compared to Adjusted net earnings attributable to The Marcus Corporation of $4,085,000 for the first quarter of fiscal 2019.
• Adjusted net loss per diluted common share attributable to The Marcus Corporation was $0.29 for the first quarter of fiscal 2020, compared to Adjusted net earnings per diluted common share attributable to The Marcus Corporation of $0.13 for the prior year first quarter.
• Adjusted EBITDA was $12,050,000 for the first quarter of fiscal 2020, compared to Adjusted EBITDA of $24,756,000 for the comparable prior year period.
• Adjusted net earnings (loss) attributable to The Marcus Corporation, Adjusted net earnings (loss) per diluted common share attributable to The Marcus Corporation and Adjusted EBITDA reflect adjustments made by the company to eliminate the impact of certain nonrecurring property closure expenses and impairment charges during first quarter of fiscal 2020, as well as certain nonrecurring acquisition and preopening expenses related to the Movie Tavern acquisition and certain nonrecurring preopening expenses related to the conversion of the former InterContinental Milwaukee hotel into Saint Kate® – The Arts Hotel, during the first quarter of fiscal 2019.

“Similar to so many businesses across the entertainment and hospitality industries, we faced unprecedented challenges resulting from the COVID-19 pandemic in the first quarter. We had to make some very difficult decisions during the quarter, including temporarily closing our movie theatres, restaurants and bars, as well as subsequently temporarily closing our hotels and resorts due to an increase in cancellations and a decrease in occupancy. We believe the actions we took were the right thing to do to help ensure the safety and well-being of our associates, customers, guests and communities,” said Gregory S. Marcus, president and chief executive officer of The Marcus Corporation.

Marcus Theatres®

“We temporarily closed all of our movie theatres on March 17, 2020, following guidance from the Centers for Disease Control and state and local authorities in response to the COVID-19 pandemic. This resulted in decreased revenues and operating income for Marcus Theatres for the first quarter of fiscal 2020, offset slightly by an extra month of operation at our Movie Tavern theatres during the quarter compared to the prior year quarter,” said Marcus. The company acquired the Movie Tavern theatres on February 1, 2019.

“The first quarter was off to a very good start, with revenues and operating income up significantly through February 2020, benefiting from several new films and strong carryover holiday season films,” said Rolando B. Rodriguez, chairman, president and chief executive officer of Marcus Theatres. “March started with a difficult comparison to last year’s top film, Captain Marvel, and then, of course, everything changed when we were required to close our theatres mid-March.”

On a comparable theatre basis, the division’s box office outperformed the industry by over two percentage points in the first quarter of 2020, according to data received from Rentrak. The outperformance comparison does not include the company’s Movie Tavern theatres because Marcus Theatres did not own them for the full quarter last year. Based upon data available from the previous owner, however, the company believes its Movie Tavern theatres outperformed the industry by over ten percentage points during the first quarter of fiscal 2020.

“Despite the lower attendance, we achieved a 7.0% increase in average ticket price and a 10.9% increase in concession revenues per person during the quarter, due in part to the extra month of operations for the Movie Tavern theatres,” said Rodriguez. He noted that the division’s operating loss was negatively impacted by nonrecurring expenses of $2.8 million which was primarily for payroll continuation payments for associates impacted by the theatre closures, and impairment charges of approximately $8.7 million.

During the first quarter, the company added four new screens, signature DreamLoungerSM recliner seating and a new SuperScreen DLX® auditorium at one Movie Tavern location. In response to the COVID-19 pandemic, the company placed on hold several projects, some of which were underway, to add DreamLounger recliner seating and new food and beverage outlets at additional theatres.

The five highest grossing films for Marcus Theatres in the first quarter of fiscal 2020 were Star Wars: The Rise of Skywalker, Bad Boys for Life, Jumanji: The Next Level, 1917 and Sonic the Hedgehog.

“Although numerous films scheduled to be released during the second quarter have been postponed due to the COVID-19 pandemic and the exact timing of when our theatres will reopen is unknown at this time, there are still a significant number of films currently scheduled to hit the box office during the second half of the year which the company expects will appeal to a broad audience base. These include Tenet, Mulan, The SpongeBob Movie: Sponge on the Run, Wonder Woman 1984, The Quiet Place Part II, The Conjuring: The Devil Made Me Do It, Halloween Kills, Black Widow, Soul, No Time to Die, West Side Story, Coming 2 America, Dune, The Croods 2 and Top Gun: Maverick,” said Rodriguez. “Looking ahead to next year, the anticipated film slate for 2021 is expected to be very strong as it now includes several films that were originally scheduled for 2020.”

Marcus® Hotels & Resorts

“Revenue per available room (RevPAR) for comparable company-owned hotels decreased 14.5% in the first quarter of fiscal 2020 due entirely to the impact of the COVID-19 pandemic,” said Marcus. On March 17, 2020, the company temporarily closed its restaurants and bars, and on March 24, 2020, temporarily closed five of its eight company-owned hotels and resorts. Marcus Hotels & Resorts’ remaining company-owned hotels were temporarily closed on April 8, 2020.

“Understandably, growing public concern surrounding the COVID-19 pandemic led to increased cancellations and rapidly declining occupancy at our properties beginning in early March, which ultimately resulted in our decision to temporarily close our hotels. Despite these closures, data from Smith Travel Research indicates we outperformed the industry by over six percentage points and our competitive set by over 10 percentage points for the first quarter of fiscal 2020,” said Michael R. Evans, president of Marcus Hotels & Resorts. He added that the division’s operating loss was negatively impacted by nonrecurring expenses of approximately $2.7 million, primarily related to payroll continuation payments to associates who were temporarily laid off during the quarter in connection with hotel closures.

“The safety of our guests and associates remains our top priority, and we are looking forward to reopening our properties and welcoming guests as soon as mandates allow and we see an increase in demand,” added Evans.

Balance Sheet

“Amidst these unprecedented times, we are on strong financial footing that we believe will help sustain our business and weather the challenges created by the COVID-19 pandemic. With the nation now beginning to make plans for reopening its economy, we look forward to gradually and safely ramping up our businesses and once again delivering the exceptional experiences people enjoy at our movie theatres, hotels and restaurants,” said Marcus.

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