What happened
Six Flags Entertainment (SIX 1.68%) shareholders have had a good week. Their stock was up 17% through Thursday trading compared to a 0.1% decline in the S&P 500.
The rally erased some of the year-to-date losses that investors have seen with the theme park specialist. Yet the stock is still down 12% in 2023, according to data provided by S&P Global Market Intelligence.
Six Flags stock got a boost from the company's first-quarter earnings update, which showed improving spending metrics.
So what
Six Flags announced on Monday that sales rose 3% through early April, to $142 million. That uptick was enough to establish a new Q1 record for the regional theme park operator. Management said the increase showed that its efforts to improve the guest experience are showing early progress. Record sales and elevated adjusted earnings, CEO Selim Bassoul said, are "proof that our new strategy and our new culture are beginning to take hold."
Yet Six Flags had to lean on rising spending and higher ticket prices to power those sales gains. Attendance fell 5% in the period, in part because of poor weather in parts of California and Texas. The company also posted expanding losses as operating costs increased.
Now what
Investors are hoping that Six Flags can return to rising attendance levels with help from new rides, attractions, and summer events. And management is aiming to make revenue more predictable by marketing more season passes. Still, this consumer discretionary business is highly sensitive to shifts in economic growth rates, weather, and changing shopper preferences. Price increases in 2022 led to much lower attendance, suggesting limited pricing power.
Six Flags also carries a high level of debt and is currently generating net losses. These factors should give investors pause as they consider the stock as a potential buy candidate.
