Stocks Possibly Affected by Regal Entertainment’s $1 Summer Movies

Regal Entertainment Group (NYSE: RGC) is the largest and most geographically diverse in its class, serving approximately 220 million moviegoers a year.

This summer, Regal theaters will offer tickets at the low, low price of $1.

Of the 569 theaters in 42 states, D.C., Samoa, Guam and Saipan, at least 340 locations will be participating in Regal’s Summer Movie Express, providing severely-discounted tickets for family movies this summer.

Vendors to Benefit from the Influx of Customers

  • All food vendors take profits from products sold, but movie theaters are in a class of their own – as the sell prices far exceed the manufacturing/production costs of the products.
  • As a point of reference, Executive Vice President of Food Service Strategies at WD Partners Dennis Lombardi estimates that 85 percent of the total profit comes from just the cost of goods; the cost of concessions in the movie industry comes in at as much as 46 percent of profits and a fifth of total revenues, according to the National Association of Theatre Owners’ President John Fithian.

While Regal publicizes that concession prices are not the same at every location, the fact remains that concessions significantly affect the revenue and total profits.

One of Regal’s most profitable vendors is undoubtedly The Coca-Cola Co (NYSE: KO), which could feel the influx of Regal visitors in the next few months.

Regal also provides Nestlé (OTC: NSRGY) brand concessions, such as Raisinets, Butterfingers, Crunches, Sno Caps and Edy’s ice cream. Other notable concession vendors include Tyson Foods, Inc. (NYSE: TSN) and Nathan’s Famous, Inc. (NASDAQ: NATH).

Partners Could Benefit As Well

  • In particular, privately operated Fandango, Inc. could see a profitable bump from the hike in movie attendees expected over the summer.
  • Publically traded National CineMedia, Inc. (NASDAQ: NCMI), holding company for Regal partner NCM Media Networks, could also feel the positive effects if Regal experiences the anticipated jump.

Competitors Could Feel Threatened

In contrast, peers within the sector could be negatively influenced if the Summer Express promotion takes away potential customers.

The three top competitors in the cinema industry are AMC Entertainment Holdings, Inc. (NYSE: AMC), Cinemark Holdings, Inc. (NYSE: CNK) and Carmike Cinemas, Inc. (NASDAQ: CKEC).

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