With the 2006 operating season coming to a close at most of the Six Flags (NYSE:SIX) amusement parks, it's clear that CEO Mark Shapiro's vision of bustling regional parks --brimming with happy young families and their fat, readily opened wallets -- will have to wait until next year.
The company closed out its telltale third quarter with mixed results. Yes, guests are happy and spending more, but that has been offset by sharp attendance declines.
Ultimately, Six Flags saw earnings from continuing operations fall to $1.06 per diluted share for the period, after a $1.25-a-share showing a year earlier. Revenue was essentially flat -- down 1% to $541 million, which masks the dramatic contrast of soaring per capita spending against fewer turnstile clicks.
The average guest spent $37.89 for a day at the park, a 13% improvement. Attendance fell by 12%, or 11% once you exclude the park in New Orleans, which remained closed during the 2006 season after being flooded during Hurricane Katrina.
So where did the rusty turnstiles go wrong? The bad weather didn't help.
Even though Shapiro notes that inclement weather "is not the factor but it is a factor," the company is quick to point out that there were 60 bad-weather weekend days at its key branded parks this year. Last year, those same properties only suffered 40 bad-weather days. Naturally, we can't pin the attendance slump entirely on Mother Nature. Rival Cedar Fair (NYSE:FUN) didn't suffer similar shortfalls, and even all-weather advance group sales were down.
Scarred by way too many thunderstorms, Six Flags will no longer be providing attendance guidance in the future. At its next update, it will only key in on items like capital expenditures, as well as revenue per capita.
Thankfully, the company sees that spending trend continuing to improve. Even more wallet-thirsty initiatives will kick in come 2007, most notably stemming from the parks' new deal with Kodak (NYSE:EK).
The film and photofinishing pioneer has already transformed the digital photography process at major theme park operators Disney (NYSE:DIS) and General Electric's (NYSE:GE) Universal Studios. Six Flags is following suit, in a deal that will find Kodak promoting Six Flags outside the gate, but also running photo operations within the gated attractions.
This is just the kind of revenue-sharing deal that Six Flags needs. Let Kodak bear the brunt of labor and get creative with ways to push more in-park prints. Next year, even the spinning family coasters going up at some of the parks will have digital video cameras on board, to pitch DVDs of the experience at the end of the ride.
There will be more Disneyfication at Six Flags, too. Retail should get a boost as the company rolls out a package pickup service, where purchased items can be sent to the front of the park. The Internet will also be a key driver, selling more than just tickets. Online sales were up 33% at Six Flags, a number that will only improve as the company begins to sell character brunch admissions, meal vouchers, VIP experiences, and its outsourced line reservation system through SixFlags.com.
Six Flags continues to explore the sale of the nine parks it put on the block earlier this year. It received interest from 50 different parties, and it's already received initial offers. Come December, Six Flags expects to announce either a successful sale, or the decision to keep the parks, if a suitable offer is not received.
The seeds are in place for a recovery in 2007. The growth initiatives are sound. The uncontrollable weather is likely to improve. It may even be worth holding on to those parks on the block for another season, to see just how valuable they really can be.
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Longtime Fool contributor Rick Munarriz enjoys taking his family on coaster treks over the summer. He did his part by hitting Six Flags Great Adventure and Six Flags Great Escape in May. He owns units in Cedar Fair and shares in Disney. He is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. T he Fool has a disclosure policy.
