Cineplex Inc. (TSX:CGX) is a stock that can’t seem to catch a break. Through no fault of management, the company has fallen from glory thanks to the continued secular decline of the movie theatre industry. Believe or not, Cineplex’s management team has stayed on top of their game relative to most other movie theatre companies. With a virtual monopoly in the Canadian theatre space, the company has been able to drive average revenues per users (ARPU) up in the past with innovative new ways to enjoy films. Think VIP movies, arcades, and D-BOX experiences. Despite a history of unlocking creativity…
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Cineplex Inc. (TSX:CGX) is a stock that can’t seem to catch a break. Through no fault of management, the company has fallen from glory thanks to the continued secular decline of the movie theatre industry.
Believe or not, Cineplex’s management team has stayed on top of their game relative to most other movie theatre companies. With a virtual monopoly in the Canadian theatre space, the company has been able to drive average revenues per users (ARPU) up in the past with innovative new ways to enjoy films. Think VIP movies, arcades, and D-BOX experiences.
Despite a history of unlocking creativity in the traditional movie-and-popcorn business, the company had hit a growth ceiling, which limited its ability to continue delivering growth to investors. At one point, Cineplex was loved by income and growth investors alike, but those days are over, and as video streamers continue to pick up momentum, Cineplex is going to need a new game plan.
Management has been creative with its abilities to grow in the past. I’ll give them that, but is delivery of overpriced concession snacks going to do anything at all to alleviate pressures that the company has suffered to its top line?
It’s clear that the “stay at home” economy is here to stay as consumers opt to stay in to watch a movie on their streaming platform of choice. Cineplex has identified this trend, and they’ve partnered with Uber Eats to offer concession snack deliveries to Canadians.
I don’t know about you, but I think the nationwide legalization of marijuana had something to do with Cineplex’s odd decision to deliver popcorn and candy to customers’ homes.
A problem that marijiuana smokers may face is a lack of “the munchies” when they smoke up before sitting down to enjoy a movie within the confines of their homes. Resistance to this side effect is futile, and if there are no Alimentation Couche-Tard Inc. (TSX:ATD.B) convenience stores nearby, you’ll be out of luck as a marijuana smoker.
That’s where Cineplex is coming in with its new concession delivery service.
Cineplex is slated to deliver a ride array of concession snacks to Canadians, and it’s not just popcorn. Hotdogs, candy, nachos and soft drinks will be available to customers across Ontario, Quebec, Alberta and B.C. If you reside in one of these provinces, odds are the service will probably be available in your area by the time you’re reading this.
Only time will tell how the service fairs, but I have a feeling that the fourth quarter of this year will see the service skyrocket. Legal marijuana kicks in October 17, 2018, and Cineplex is going to be ready with a bag of popcorn in hand.
Although concession snack deliveries sound ridiculous on the surface, I think it may show some promise once legal weed takes effect. The new service will probably relieve a minimal amount of pressure though, so I’d encourage investors to continue avoiding the stock.
With less of an incentive to go out and see a movie, the concession snack delivery may be just another means of offloading excess scene points that Canadians may have accumulated over the past year.
Stay hungry. Stay Foolish.
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Fool contributor Joey Frenette owns shares of ALIMENTATION COUCHE-TARD INC. Alimentation Couche-Tard is a recommendation of Stock Advisor Canada.