SeaWorld Entertainment Inc. (SEAS) released a disappointing second-quarter earnings statement on Wednesday, causing its stocks to take a sharp tumble.
The aquatic theme park company announced that attendance for the year through June 30 fell 4.3 percent, though attendance was up 0.3 percent compared to the second quarter of 2013, and the company said it expects revenue to fall 6 to 7 percent in 2014.
"We were pleased to report attendance growth in the quarter despite a challenging industry and competitive environment and a tough comparison to the prior year quarter, which included the attendance benefit from opening our largest expansion ever at SeaWorld Orlando," said SeaWorld CEO Jim Atchison.
SeaWorld reported a second-quarter profit of $37.3 million, but quarterly revenue was $405.2 million, far below the $445.3 million the company expected.
SeaWorld says it will implement new cost-saving measures try and trigger growth. Additionally, the company announced a new $250 million share buyback program for its investors.
"In order to drive growth, we are undertaking a number of initiatives, including a detailed review of our company-wide cost structure with the goal of driving significant cash cost savings in 2014 and 2015," Mr. Atchison said. "Our intent is to re-invest these savings into additional new attractions at our destination parks and return capital to shareholders."
By Wednesday afternoon, the news was having a big impact on the company's share price. SeaWorld stock fell almost 33 percent to $18.96 a share in afternoon trading.
So what's behind the numbers?
For the first time, SeaWorld is saying that media attention surrounding the treatment of its animals is hurting attendance at its parks.
"The company believes attendance in the quarter was impacted by demand pressures related to recent media attention surrounding proposed legislation in the state of California," SeaWorld said in its earnings statement.
That legislation is a proposed study by two members of the California House of Representatives to review the possible "psychological and physical harm" to orcas in captivity. The possible harms came to widespread attention in "Blackfish," a CNN documentary released last year that shone a harsh light on SeaWorld's practices and inspired a national debate about the welfare of captive marine mammals. The movie explores the living conditions conditions of captive orcas and examines circumstances surrounding the death of orca trainer Dawn Brancheau in 2010.
SeaWorld continues to defend the way it treats its animals.
"[SeaWorld's] attendance has been flat since Blackfish came out," Andy Brennan, lead analyst at IBISWorld, an industry research group, said in an interview. "Essentially the company in previous statements said the decline in attendance was caused by other factors, but now they are having to justify bad earnings and why stock prices are going down."
Mr. Brennan said SeaWorld "is underperforming compared to [other companies] in industry" and that the negative attention is to blame. In 2013, the same year "Blackfish" was released, attendance at SeaWorld parks was down 4.1 percent.
The media attention is affecting other parts of SeaWorld's business. In late July, SeaWorld and Southwest Airlines ended a 26-year marketing relationship. Many believe pressure from animal rights groups caused the split, but Southwest said the move was "strictly business."
Brennan said SeaWorld might need to rethink its business model "because it is tied to the performance of live animals."