Stock market news for Canadian investors: Cineplex, McDonald’s report earnings

“I’ve lived through a number of recessions in our business and our business actually does better when economic times are tougher because people and guests travel less, they stay closer to home, and we become one of the cheaper forms of having a good time outside their place of residence,” Jacob said in an interview on Tuesday, noting how much cheaper it is to go to a movie than see live sports.

“We’ve seen that happen a number of times over the last 25 years.”

His remarks come as the wider business community is staring down several economic headwinds, while the film sector works to bounce back from the 2023 U.S. writers and actors guild strikes, which dimmed movie sets for months and upended the 2024 release schedule.

As the industry rebounded, last year ended with a steady stream of film releases including highly anticipated sequels and plenty of Oscar bait.

“The three big ones that made a difference were ‘Wicked,’ ‘Gladiator II’ and ‘Moana 2,’” Jacob said. “They were all the drivers of the U.S. Thanksgiving period, and that worked out really, really well for us.”

The trio of films helped Cineplex deliver fourth-quarter earnings of $3.3 million or five cents per share. The result for the period ended Dec. 31 compared with a loss of $9.0 million or 14 cents per share a year earlier.

The company’s revenue also rose during the quarter to $362.7 million, up from $315.1 million in the last three months of 2023, while theatre attendance totalled 11.1 million, a jump from 9.6 million a year earlier.

Box office revenue per patron followed a similar pattern, reaching $13.26, up from $12.90 in the same quarter last year, while concession revenue per patron was $9.41, up from $9.28.

Analysts are now watching to see whether that momentum will be threatened by either the California fires or the recent trade drama, which could raise prices on consumer goods and cause Canadians to rethink discretionary purchases like movie tickets.

Cineplex executives, however, are confident their business won’t face much upheaval.

Gord Nelson, the company’s chief financial officer, reminded analysts on a Tuesday call that Cineplex is fairly insulated from the recent tariff threats because it doesn’t transfer physical goods across borders.

About 99% of the company’s revenue is generated in Canada through operations and facilities in the country, he said.

Film rentals, labour and occupancy costs make up the bulk of the company’s expenses and are “not caught by any current tariff discussions,” Nelson said.

Cineplex will watch out for potential impacts and “sourcing opportunities” for items ensnared by tariffs, like food, but Nelson doesn’t foresee any material impacts.

Jacob has a similar outlook.

“Most of our costs are not impacted by the tariffs, maybe popcorn would be one, but it’s not a significant impact,” Jacob said.

While Canadians have recently rushed to patronize homegrown brands to fight the U.S. tariff threats, he said Cineplex hasn’t been facing questions about where it gets its concession stand snacks.

Audiences also don’t seem to be factoring in a film’s origins to their viewing decisions and he doesn’t make much of chatter about whether the country’s film sector will land in Trump’s crosshairs as he works to repatriate American industries.

“Some are concerned about whether the movies will be made in Canada,” Jacob said.

“If they’re not made in Canada they have to be made somewhere, and we’ll still be playing those movies.”

Canada’s film sector has been growing steadily for decades with the country hosting sets for “Deadpool,” “Interstellar,” “Suicide Squad” and the upcoming “Tron: Ares.”

The wide swath of countries supporting film production helped the industry weather the California wildfires.

“Superman was filmed in Atlanta,” Jacob said of the upcoming superhero flick starring David Corenswet as the Man of Steel.

“Almost 95% of the stuff is done outside of California.”

On a conference call with investors Monday, McDonald’s Chairman, President and CEO Chris Kempczinski said industry-wide fast food sales to low-income consumers were down double-digits in the U.S. in the October-December period.

“That’s the landscape that we’re looking to navigate through. It’s why it’s so important that we make sure that we have a strong value program,” Kempczinski said.

McDonald’s U.S. sales slowed in the first half of 2024 as customers grew tired of price increases. The company responded in June with a $5 value meal that reignited traffic. The deal was so successful that the company extended it through next summer.

But then an E. coli outbreak, which was first reported Oct. 22, sickened at least 104 people in 14 states, including 34 who were hospitalized, according to the U.S. Food and Drug Administration. One person in Colorado died.

The FDA closed its investigation into the outbreak in December, saying McDonald’s contained it once it stopped serving the raw onions the virus was linked to. But Kempczinski said the outbreak hurt sales of the Quarter Pounder, which is usually a big profit-generator.

Sales also remain weaker in the Rocky Mountain states where the outbreak was centered, Kempczinski said. McDonald’s doesn’t expect them to recover until the beginning of the second quarter.

McDonald’s said it is working to get customer traffic back up in the U.S. and will then layer in new products that will generate excitement and increased spending. The snack wrap, a menu item that has generated a lot of excitement, will return sometime this year, and McDonald’s is also planning a new chicken strip offering, Kempczinski said.

Kempczinski said the company is also learning a lot about demand for beverages like energy drinks from the beverage-focused CosMc’s chain it has been testing since early last year. Kempczinski said the company is trying to figure out how it can capture that demand within its existing restaurants.

International sales in McDonald’s company-operated markets edged upward slightly in the fourth quarter, with particularly strong sales in Germany and Italy. But Kempczinski said McDonald’s is also struggling to draw lower-income consumers in the U.K.

The bright spot for the fourth quarter was McDonald’s licensed markets overseas, where same-store sales climbed 4.1%. McDonald’s said it saw strong sales growth in the Middle East, where sales have struggled in recent years, and Japan.

Overall, McDonald’s global same-store sales rose less than 1% for the fourth quarter. That was better than the 1.1% decline Wall Street had forecast, according to analysts polled by FactSet.

Fourth-quarter revenue fell slightly to $6.38 billion, just short of the $6.45 billion analysts were expecting.

The company’s fourth-quarter net income also fell, 1% to $2.01 billion. Adjusted for one-time items, McDonald’s earned $2.83 per share, which was lower than the $2.85 per share than Wall Street anticipated.

McDonald’s shares rose more than 4% in early trading Monday.