To The Moon

It was a rough weekend at the corner multiplex. Movie theaters across the country had just $61.6 million in gross ticket sales over the weekend, the weakest box office action in more than two months. Horror flick Candyman was the top draw, but in terms of audience counts, the showing proved to be more trick than treat.

This is literally the worst weekend performance of the summer season, and the trend isn't kind. We've seen box office receipts post sequential declines in five of the past seven weeks since peaking with Black Widow's premiere. That particular week in early July was the only weekend that the industry broke above $100 million in ticket sales, a feat that happened every single weekend for movie studios during the 2018 and 2019 peak summer seasons.

An empty theater is obviously a bad look for the industry, flying in the face of the narrative of AMC Entertainment Holdings (NYSE:AMC) as one of this year's hottest stocks. AMC is nearly a 20-bagger in 2021, but the fumbled momentum for the exhibitors this summer is defying the otherwise buoyant stock chart. Let's take a closer look at what went wrong, and why it's too soon to dismiss AMC's chances to get back on track.

The "Candyman" can't

Don't point the finger at Comcast's (NASDAQ:CMCSA) Candyman reboot as the cause for the slump. It's checking in with a solid 85% approval rating for film critics tracked by Rotten Tomatoes. You also can't blame the widespread availability of online streaming options. Candyman (as well as the weekend's second-highest grossing film, Free Guy) are exclusive theatrical releases.

An easier culprit to blame right now could be the delta variant of COVID-19. The summertime surge of the deadly virus is likely keeping people away from indoor social settings, but even that's not a viable lone scapegoat. Box office receipts are 43% below the same period -- the weekend before the Labor Day holiday weekend -- in 2019. It's a safe bet that your local bars, indoor malls, and even restaurants aren't seeing a 43% plunge in sales over the past two years.

This summer was supposed to be the great rebirth of going out to the movies. Studios that had to delay 2020 and even early 2021 releases are now flooding the pipeline. Comcast's Universal Studios, for example, was originally set to put out Candyman 13 months ago. Here we are, a couple of delays later, and audiences failed to materialize despite saying the film title five times in front of a mirror. Less than 1% of the country saw Candyman over the weekend, and less than 2% of the country saw any movie at the multiplex.

The convenience of streaming video entertainment is something that will challenge AMC and its smaller peers. It also obviously doesn't help that folks can freely enjoy movies at home without having to mask up the way that the Centers for Disease Control and Prevention is suggesting for indoor gatherings at the movie house.

The bullish thesis that summer audiences would build for the multiplex operators has gone the other way. This doesn't mean that the industry is doomed. It doesn't mean that folks have flocked back home after the initial retro novelty of going back to the movies.

More to an AMC-specific point, it doesn't mean that the leading exhibitor took a 43% hit to its top line this weekend relative to where it was two years ago, when its stock was trading much lower. The chain has been gaining market share this year against other movie theater stocks, and it's also getting a lot better at monetizing the experience. Food and beverage purchases per customer were a whopping 42% higher at AMC in the second quarter than they were during the same financial period in 2019.

We're not at the point where the concessions stand is making enough to offset the drop in attendance, but this is the high-margin part of the multiplex model. It's problematic to see the telltale summer season fizzle out this way, but there's still time to go before the end credits start to roll.