The Marcus Corporation (MCS) recorded a third quarter 2011 loss of 7 cents per share, which compares unfavorably with the Zacks Consensus Estimate of 5 cents and 11 cents earned in the year-earlier quarter.
The entertainment and lodging company’s revenues declined 12.9% year over year to $84.0 million and lagged the Zacks Consensus Estimate of $95 million. The drop in revenue was due to weak performance by the movie theater division, Marcus Theater, partially offset by solid performance by the company’s lodging division, Marcus Hotels and Resorts.
The Milwaukee-based company posted a growth of 6.7% in revenues and 9.8% growth in revenue per available room (RevPAR) on an increase in occupancy levels and room rates with an uptick in business traveler and leisure demand. Overall occupancy rate registered a growth of 3.2 percentage points and an average daily rate increase of 3.1% in the third quarter of 2011.
Marcus’ box office revenues were down 21.4% year over year during the third quarter and concession revenues were down year over year 17.2%.
The overall decrease in theatre revenues was due to lower attendance at comparable theatres. Poor performances of this year’s winter film slate and tough comparison arising from the record-breaking performance of Avatar and gift-card income last year resulted in the quarterly decline. The impact of fall in overall attendance was partially offset by an increase in average admission price.
Operating income of Marcus plunged to $0.9 million in the reported quarter.
Financial Position
At the end of the quarter, the company had cash and cash equivalents of $10.1 million, long-term debt of $183.4 million and shareholders’ equity of $337.3 million.
Our Take
Marcus reported weaker-than-expected results. Accordingly, we expect analysts’ estimates to go down in the coming days. However, with a strong booking window, its lodging division is expected to perform well in 2012. Management continues to look for opportunities to grow hotels under management contracts aided by its strong balance sheet and credit availability. Moreover, with limited supply growth in the market, management expects to gain pricing power as the economy improves.
Marcus currently retains a Zacks #3 Rank, which translates into a short-term Hold rating. We are also maintaining our long-term Neutral recommendation on the stock. The competitors of Marcus include China Lodging Group Limited (HTHT) and Intercontinental Hotels Group plc. (IHG).
CHINA LODGING (HTHT): Free Stock Analysis Report
INTERCONTL HTLS (IHG): Free Stock Analysis Report
MARCUS CORP (MCS): Free Stock Analysis Report
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