Milwaukee-based Marcus Corp. on Tuesday reported a significant loss for the first quarter of fiscal 2020 as its hotel properties and movie theaters remain temporarily closed due to the ongoing COVID-19 pandemic.
The Marcus Corp. recorded a first quarter net loss attributable to the company of $19.4 million, compared to net earnings of $1.9 million for the first quarter of fiscal 2019. Net loss per diluted share was 64 cents, down from net earnings of 6 cents per diluted share last year.
The company’s operating loss for the quarter was $22.2 million, compared to operating income of $5 million for the same period last year.
Total revenue for the quarter was down 6.2% to $159.4 million.
“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,” said president and chief executive officer Greg Marcus in a statement.
The company’s first quarter costs and expenses totaled $181.7 million, which included $8.7 million in nonrecurring expenses and impairment charges resulting from the impact of COVID-19. The company incurred $5.5 million in property closure expenses, largely covering payroll continuation for temporarily laid off employees until they could receive unemployment benefits, said Doug Neis, chief financial officer.
The end date of the first quarter was March 26. All 90 Marcus Theatres locations as well as restaurants and bars at Marcus Hotels & Resorts’ eight properties have been closed since March 17. Five of those hotels closed March 24, followed by the remaining three on April 8.
Revenues from both the hotel and theater divisions are currently halted, but Marcus said shutting down operations was the right thing to do for the safety of its employees, customers and communities.
During the Marcus Corp.’s first quarter earnings conference call Tuesday, Marcus discussed several measures the company is taking to “preserve cash and ensure sufficient liquidity to withstand the impacts of the current situation.” Those steps include halting all non-essential operating and capital expenditures, temporarily laying off the majority of its hourly theater and hotel associates, in addition to temporarily reducing property management and corporate office staff levels, and temporarily reducing salaries of all remaining employees. Both Marcus and his father, chairman Stephan Marcus, took 50% salary reductions.
Last week, the company announced it is receiving a $90.8 million 364-day loan, which requires the company to pause quarterly dividend payments. The loan is through an existing agreement between Marcus and several banks, including JPMorgan Chase Bank as administrative agent and U.S. Bank as syndication agent.
In addition, Marcus Corp. has received funds through the federal government’s Paycheck Protection Program at some of its hotels such as the Hilton Milwaukee City Center.
Marcus said the company is currently developing plans to reopen once state and local authorities lift restrictions. But there are still lots of questions surrounding that process and how consumers will behave.
The timing of reopening its hotels will be determined by the ramp up of demand, he said.
“Whether the return to more normal demand is more rampant as it was after 9/11 or occurs over the course of one or more years as it was after the 2008 financial crisis is unknown at this time,” said Marcus, also noting uncertainty surrounding two major upcoming events: the 2020 Democratic National Convention in Milwaukee and the 2020 Ryder Cup in Sheboygan County.
The timing for Marcus Theatres’ reopening is also uncertain, even as some states have lifted restrictions on movie theaters and restaurants.
“We don’t plan to reopen until we are certain that we can provide a welcoming and safe experience for employees and customers,” he said.
The company expects to reopen its theaters with social distancing guidelines and 50% capacity, which it put in place for a short time before closing in March. Marcus said reduced capacity may impact attendance of $5 Tuesdays and opening weekends of major film releases, but it won’t necessarily result in lost revenue across the board.
Prior to the COVID-19 outbreak, quarter one was off to a strong start particularly driven by Marcus Theatres’ performance with carryover films from 2019 and new films such as “Star Wars: The Rise of Skywalker,” “Bad Boys for Life,” “Jumanji: The Next Level,” “1917” and “Sonic the Hedgehog.”
In addition, Marcus Corp.’s hotel and theater divisions both outperformed respective industries by more than 2% during quarter one, including its Movie Tavern theaters outperforming the industry by an estimated 10%.
The company is expecting to capitalize on delays of a significant number of films currently scheduled to hit the box office during the second half of the year and next year. Films such as “Tenant” and “Mulan” are still scheduled to premier in July.
“If those films hold to those dates, and we need to recognize this is an if, then I could see all or most of theaters opening a few weeks before that so we can get our people and processes ready for the new release,” said Marcus.
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