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Diversification may be double-edged sword at Cineplex

Canada’s largest movie theatre chain is paying a price — at least for now — to reduce its reliance on Hollywood.

For more than five years, Cineplex Inc. has been pursuing a diversification strategy that has seen it branch out beyond its core business, which hinges on box office receipts that can fluctuate from quarter to quarter.

As part of its pivot, Cineplex has ventured into a range of new areas, from microchip-assisted golf to non-traditional theatre content — including a highly anticipated upcoming boxing match — to entertainment complexes stuffed with bars and video games.

However, judging from the drubbing its stock has taken since the release of its most recent results, Cineplex’s diversification efforts could also be acting as a double-edged sword. After posting weaker-than-expected second-quarter earnings on Wednesday, Cineplex shares tumbled, closing at $44.25 on Thursday, a 10-per-cent drop on the week and the stock’s lowest point since 2015.

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