Q2 profit for Regal Entertainment Group

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NEW YORK -- Movie theater operator Regal Entertainment Group reported Thursday a second-quarter profit that more than tripled on the sale of its stake in ticketing service Fandango, but lower attendance raised some eyebrows on Wall Street.

"We are pleased with the solid year-to-date boxoffice performance," Regal CEO Mike Campbell said. "We are also encouraged by the early third-quarter boxoffice results and the outlook for the balance of the year."

The exhibitor posted a profit of $52.7 million, compared with $16.6 million in the year-ago period. The Fandango sale added $17 million in the latest period, while the year-ago quarter included a $19 million loss on debt retirement.

Regal's second-quarter revenue declined 0.2% year-over-year to $683.4 million. Admissions revenue rose from $452.5 million to $457.9 million, while concession revenue improved from $185.2 million to $197.4 million.

Attendance in the latest quarter amounted to 61.7 million, down 5.3% from 65.2 million in the year-ago period. However, Regal said its average ticket price in the second quarter had risen to $7.42 from $6.94 last year.

In a first reaction, Wedbush Morgan Securities analyst William Kidd called the admission trend "troubling" and "a significant concern" given that "the long-term health of the industry is based more on attendance trends than the company's ability to continually raise prices above inflation."

He also called the 5.3% admissions decline "alarming because this was supposed to be one of the strongest summer boxes ever."

Kidd said he may have to rethink his overall business thesis for movie theater chains based on Regal's latest set of quarterly results.

"This industry has been grappling with competitive concerns for the past few years, particularly from the likes of DVD, VOD and Internet sales," he wrote in a report. "It generally has been our thesis that although those trends are negative for the industry, theater attendance could remain strong in periods with a good film slate. Naturally, we feel some need to revisit that thinking, given that although second-quarter attendance did hold up for blockbusters, the rest of the slate did not see a similar benefit as it generally has historically."

As a result, Kidd suggested that "some of the industry pressures might be more pronounced than previously thought."
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