The summer movie season that took off so strongly with Top Gun: Maverick has been drifting in recent weeks. The $65.4 million in U.S. ticket sales that theaters collected two weekends ago was their weakest result since late February.
However, this is not the end of AMC Entertainment Holdings' (AMC 3.96%) renaissance. It's just the way that summers typically wind down at the multiplex. With students in many parts of the country already back in school, Hollywood schedules a lull in its high-profile releases at this time of year. Stateside box office receipts improved to $78.9 million last weekend, but that was still the second-worst weekend for ticket sales in the last three months. AMC and many of its peers will be fine. They are just catching their breath.
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Feature attractions
Things could get choppy in the near term. Warner Bros. Discovery (WBD -2.17%) is postponing the premieres of some of its highly anticipated DC Comics releases. Shazam! Fury of the Gods is getting bumped from this year's holiday season to March 2023, while Aquaman and the Lost City is being rescheduled from March 2023 to December 2023.
Indeed, Warner Brothers Discovery has been turning heads for all the wrong reasons. Earlier this month, it shelved Batgirl and other HBO Max-bound content.
Warner Bros. Discovery has thankfully been the exception, not the rule. Studios have seen how well movies in certain lucrative genres are doing on the silver screen. The same Hollywood giants that were starving multiplex operators in order to feed their premium streaming services are now back to giving exhibitors first crack at potential box office winners. They still may send romcoms, indie projects, and comedies directly to their affiliated digital platforms, but you can be sure that most superhero, horror, action, and family-friendly animation projects will have exclusive theatrical release windows.
That ticket sales in this vital season for the film industry have come to such a grinding halt is still problematic. Yes, studios stock the pond with their biggest summer releases between Memorial Day and July, but the deceleration in recent weeks has been far from business as usual. Two weeks into the current quarter, movie theaters were having their best third quarter since 2016. Now, you would have to go back 24 years to find a pre-pandemic period with weaker quarter-to-date domestic returns -- and that's without adjusting for inflation.
Was the surge in attendance earlier this summer simply driven by a transient burst of nostalgia? Have viewers now returned to the admittedly comfortable alternative of streaming their media at home?
Not necessarily. It's a matter of content, and the industry is still recovering from the production delays and pauses it endured during the earlier phases of the pandemic. Hollywood has tightened the spigot on tentpole releases -- there's a mere trickle of new films arriving right now. But that will change again later this year. You shouldn't expect to see other studios following Warner Bros. Discovery's lead. They know that the right movies will draw a crowd. The segments of the viewing public that prefer to stream movies will have to patiently wait until the end of films' exclusive theatrical release windows.
And AMC will be fine. It returned to positive adjusted earnings before interest, taxes depreciation, and amortization (EBITDA) and operating cash flow in the second quarter. There will be a sequential dip in revenue in the third quarter, but remember, too, that it's not just about ticket sales these days. AMC has gotten better at getting customers to spend more on high-margin snacks and beverages. After improving its mobile ordering, refreshing its food and drink offerings, and adding MacGuffins Bars to its theaters, it has found its patrons are spending 32% more per capita than they did in 2019.
The next few weeks may not seem very inspiring. AMC made that clear during its second-quarter earnings call earlier this month. "Things will slow for several weeks," CEO Adam Aron said at the time. "Don't expect too much of us for all of Q3."
Positive catalysts for movie theater stocks may not be coming soon, but things should pick up in the fourth quarter. A sleeper hit or two from the horror genre in October will lead the way to higher-profile releases in November and December. The summer blockbuster season may have ended a bit early, but the future of the multiplex is still bright.
