Cineplex Could Introduce Price Hikes And Premium Tickets Due To Minimum Wage Increase, Poor Sales
The movie theatre company faces a rough year ahead.
Cineplex is in a bit of a bind due to a shaky fourth quarter that, according to an analyst, “just didn’t deliver the upside strength.” Even Star Wars: The Last Jedi couldn’t prevent the company’s shares from falling nearly four per cent on the Toronto Stock Exchange this past Monday.
The National Bank of Canada has cut the price target for Cineplex’s shares amid forecasts of a six-point drop in box office revenue, from a previously predicted 9 per cent to a now estimated three per cent.
Adam Shine, an analyst for the bank, says that Star Wars: The Last Jedi underperformed in the last two weeks of 2017, which ultimately contributed to the share drop.
Adding to the company’s stress is the rough box office forecast ahead for 2018. The second quarter will likely be the strongest, with movies blockbusters like Avengers: Infinity War, Deadpool 2, Solo: A Star Wars Story, Te Incredibles 2 and Jurassic World: Fallen Kingdom set for release.
But by the fourth quarter, the box office is expected to be weak as sequels to X-Men, Wreck-It Ralph, Fantastic Beasts and Transformers, plus a live-action Mulan film, make it to theatres.
The bank recommends that Cineplex “look to prices” in order to deliver any sort of growth. This means considering.
“We look for Cineplex to push harder than usual in the area of pricing as it explores more reserved seating (extra $1 for 1-2 middle rows across select screens in certain theatres) and strives to mitigate the effects of rising minimum wages in Ontario through cost cutting and some price hikes," reports the bank’s quarterly preview.