AMC Entertainment's (AMC) first-quarter earnings are going to look dramatically better than last year's when the theater operator reports results next Monday, but don't get lured in by the comparison.
Theaters were still clawing their way out of the pandemic lockdowns this time last year as moviegoers remained reluctant to go to the cinema. They're now showing up in larger numbers, but crowds are still an estimated 40% below pre-pandemic levels, and that's going to make a real comeback difficult.
Imager source: Getty Images.
Better, but not great
Comparatively speaking, AMC's quarter will be good. As CEO Adam Aron said about the fourth quarter, it was the best showing the theater chain had in two years, and that will undoubtedly repeat itself this time around.
Cumulative box office receipts are running about $1.3 billion over the first three months of 2022, some 460% ahead of last year -- but 25% behind 2020, even though AMC, Cinemark, and Cineworld's Regal had all closed their theaters by the middle of March that year.
There are fewer films being released this year, and fewer still that are expected to be blockbusters.
In the first quarter, January started off with Spider-Man: No Way Home still bringing in moviegoers and $163 million in box office receipts for the month, according to Box Office Mojo, but that momentum has since dissipated. Uncharted then topped the charts in February at $84 million, and The Batman led the way in March with $338 million in gross receipts. It's an overall uninspiring performance.
Based on current trends, industry site The Numbers estimates the number of tickets sold this year will jump 46% over 2021, resulting in about 728 million tickets being sold, or triple 2020's number, so AMC's performance this year can't help but be better. But that doesn't mean movie theaters are back.
Hit films are not enough
Wall Street is looking for losses from AMC of $0.63 per share this quarter on revenue of $736 million, well ahead of the year-ago figures but substantially below 2019.
With an economy that's increasingly looking sickly, inflation continuing to climb, and real disposable income falling in March, spending money on the movies has fallen lower on the priority list, especially with tickets over $9 each.
Image source: Getty Images.
For a family of four, it becomes an expensive night out, meaning fewer people will go. Even streaming services are starting to feel the effects of the slowdown, and streaming a movie requires little more effort than moving to the couch. And if AMC couldn't report profits when Spider-Man first hit the big screen, it's not going to now, with Batman generating far less in receipts.
At least AMC is investing in itself, committing to installing 3,500 laser projectors in its theaters over the next few years while also acquiring a few more theaters. Those seem like better investments than its purchase of a defunct gold and silver mine to help pay down the $5.4 billion in long-term debt and $1.8 billion in short-term debt it carries.
So watch for AMC Entertainment's earnings to look better when it reports next week, but the movie theater industry is not a healthy business yet, and investors should hold off on buying in, even if its stock gets a bounce from the results.
