Raisinet recession

Dip in concession sales cuts theater profits

NEW YORK -- It seems American moviegoers might be going with the large, rather than the jumbo, when it comes to popcorn and soda.

Two operators of film theaters on Monday reported weaker U.S. revenue as dwindling concession spending added to smaller admissions figures in the third quarter despite record-breaking results from Warner Bros.' "The Dark Knight."

Both made reference to the tough economic environment, which could cut into consumers' willingness to spend on popcorn and movie tickets despite the conventional wisdom that moviegoing is a recession-proof activity.

However, the numbers announced by Carmike Cinemas after the market close paints a different picture. The company reported a $24,000 profit, down from the $2.1 million recorded in the year-ago period as revenue dropped 7.4% to $122.9 million. Admissions revenue fell 6.9% to $81.1 million, and concession revenue decreased 8.3% to $41.8 million, exacerbating the situation. Columbus, Ga.-based Carmike operates 250 U.S. theaters.

"The economic environment is very challenging," CEO Michael Patrick said, though he lauded increased revenue per patron, the closure of underperforming theaters and cost measures as factors that helped the bottom line. "In the face of the current operating environment, Carmike has taken timely steps to reduce expenses, with third-quarter general and administrative expenses cut by over 14% as we lowered salaries and wage expense, incentive compensation and legal and professional fees."

Earlier in the day, Cinemark Holdings had reported a third-quarter profit of $20.4 million, reversing a year-ago loss of $23.4 million. Revenue rose 1% to $476.2 million, but only because gains in international markets made up for lower U.S. results.

International revenue in the quarter rose 26.1% to $118.4 million, but the U.S. saw a 5.2% decline to just below $360 million. Plano, Texas-based Cinemark operates 414 theaters in the U.S. and additional ones in 12 foreign countries, including Mexico and South and Central America.

Financial details mentioned on Cinemark's earnings call provided further insight into the divide between domestic and international operations in the latest quarter.

Overall admissions revenue increased 0.2% (+23.9% internationally and -5.5% domestically) driven by a 4.5% gain in average ticket prices (+3.1% in the U.S. and +16.4% abroad). Concession revenue climbed 1.2% (-4.7% in the U.S. but +27.8% internationally). Attendance declined 4% (-8.4% in the U.S. and +7% internationally), executives said in a conference call.

Concession sales, a potential early indicator of the effect the economy has on patrons, are mainly driven by films shown rather than other factors, Cinemark management argued.

Both exhibitors' management teams looked ahead fairly optimistically, though, citing strong fourth-quarter film releases and nothing that the period's boxoffice has started ahead of expectations.

"We expect a solid fourth quarter at the boxoffice, with bellwether family films such as 'Madagascar: Escape 2 Africa,' 'Beverly Hills Chihuahua,' 'High School Musical 3: Senior Year' and 'Bolt' in 3-D as well as the James Bond sequel 'Quantum of Solace' and the vampire saga, 'Twilight,' " Carmike's Patrick said.

Cinemark management in its call mentioned a 4% U.S. increase in concession revenue per patron in the latest quarter and Carmike's Patrick cited a similar trend.

"We again achieved an increase in average per-patron revenue as both admission and concession/other sales per patron rose year-over-year based on price increases implemented earlier in 2008," said Carmike CEO Patrick.

And Cinemark CEO Alan Stock said: "As we head into the fourth quarter, the domestic industry's boxoffice was up approximately 17% for the month of October, and we feel consumers will continue to seek affordable entertainment options during these challenging economic times."
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