AMC Entertainment Group (AMC 8.06%) was devastated at the pandemic's onset. When it was forced to close its theaters to visitors, revenues plunged close to zero for several months. Fortunately, several effective vaccines against COVID-19 were developed, and billions of doses have been administered worldwide.
That's allowed world governments to remove business restrictions and give folks the confidence to leave their homes more frequently. One of the beneficiaries of economic reopening has been AMC, and blockbuster movies are thriving on the big screen again.
Spidey rescues AMC Entertainment Group
Late 2021 release Spider-Man: No Way Home has grossed $1.9 billion at the box office worldwide and $800 million domestically. Before its success, the highest-grossing movie domestically was Shang Chi: Legend of the Ten Rings at $224 million.
The momentum continued into 2022. The Batman has grossed $333 million domestically and $674 million worldwide. Success for blockbuster films at the box office is great news for AMC. It has helped revenue bounce back and put the company on a more sustainable footing.
In AMC's fourth quarter ended Dec. 31, sales increased to $1.2 billion. That's up from the meager $162 million it earned in the same period the year before. Interestingly, AMC generates revenue from both admissions and concessions. The latter is a more lucrative business.
AMC's food and beverage sales totaled $380 million in its most recent quarter. Meanwhile, food and beverage costs totaled just $59 million. As many folks already knew, that $9 bucket of popcorn AMC sells you doesn't cost the company anywhere near as much.
In contrast, AMC's admission revenue totaled $666 million, with costs to show the films reaching $310 million. A margin of over $300 million is nothing to complain about but nowhere near the profit provided from food and beverage sales.
Still, AMC needs blockbuster hits to attract viewers to its theaters. Only then can it sell $9 buckets of popcorn and $6 cups of soda. The fact that blockbusters are thriving again is great news for AMC.
What this could mean for AMC investors
This also dispels another concern that rose during the pandemic: Studios would skip the big screen and release films straight to streaming services. While that has occurred occasionally, the recent success of the two movies mentioned above makes it unlikely that studios will go directly to streaming to a large degree. That does not mean AMC is in the clear. Fewer folks visit movie theaters than before the pandemic, and studios are shortening the time between box-office release and streaming-service availability.
Nevertheless, the Spider-Man flick helped AMC report $46.5 million in cash from operations in its fourth quarter after several quarters of going negative in this metric. The effects of The Batman movie will reveal themselves in AMC's next quarterly earnings release. Shareholders are hoping for the momentum to continue as the world emerges from the worst phases of the COVID-19 pandemic.