The Future Of Movie Theaters

In this issue of the peel:

• Lil Wayne’s wise words from 2008 have inspired the whole world
• Meta eyes a stake in eyewear while restaurant stocks suffer
• The Box Office Revival Theory of 2023 didn’t really happen

Market Snapshot

Banana Bits

• NFLX’s pivot into ads is paying off very well
• The labor market continues to show signs of easing
• Retail investors are getting optimistic… and I’m scared
• Party members prepare for a Presidential race without the incumbent, despite the incumbent continuing to yell at clouds that he’s gonna stay in the race

Macro Monkey Says

Poverty Is Real Scared

Being the well-known poet and philosopher he is, Lil Wayne has truly inspired a generation.

And it turns out that his single most inspirational literature came with the 2008 release of “A Milli.”

Specifically, his most eloquent, poignant bar came early, saying, “I’m a Young Money millionaire.” Now, everyone else is too.

At least, that’s what we learned earlier this week from UBS’s 2024 Global Wealth report, which they bought and rebranded from their new pet, Credit Suisse.

Let’s get into it.

The Numbers

It’s not just the number of cringe-rich-fluencers that have grown over the past 15 years. Almost everyone’s wealth has, too.

In 2022, global wealth registered a decline of 3%. However, this century’s Michael Jordan year of 2023 lived up to its name, more than offsetting 2022’s losses by growing 4.2% in total. Since the end of 2021, global wealth has increased 1.7%.

Source

As expected for anything to do with wealth, it was far from evenly distributed. In local currency terms, Turkey’s psychopathic levels of currency devaluation led to an explosion in average wealth of 158%.

Japan had a good year after exiting its negative interest rate environment, with average wealth growing 2% in yen terms, exploding more than 4x to 9% in USD terms.

Switzerland saw the opposite effect, with average wealth up 3.6% in Swiss Francs yet down 6% in USD.

Going back to the GFC in 2008, average wealth increased in all 56 countries sampled…except one.

Source

Greece’s bankruptcy is still holding the country back compared to the rest of the world, exactly the opposite of where this country stood in ~400 B.C.

When looking at both average and median global wealth, we can start to get a sense of exactly who drove that wealth growth. When the average far outpaces the median, this tends to suggest that the already wealthy led the way.

When the median is close or greater, as in the case of the U.K. and U.S., this implies that wealth increases were broad-based.

Source

In fact, global inequality largely decreased from 2008 to 2023. Sure, just 26 individuals still control 19.7% of total global wealth (those with a net worth >$50bn), but inequality fell while mobility rose over this 15-year period.

Source

Here, we can see that the number of adults with less than $10k in wealth fell by almost half during the period. The Middle East dominated in declining inequality, with Saudi Arabia, the UAE, and Israel leading the way.

In the U.S., inequality fell at a slower pace, declining 2.4% since 2008. Singapore, Finland, and Spain saw the greatest increases in wealth inequality.

Source

The Takeaway?

This report serves as a great reminder of why we all need to dedicate our lives to creating shareholder value and growing the economy.

Economic growth allows us to increase the global standard of living, especially when done in a distributed manner. This is how we give our children better lives than we had.

Factoring in local currency inflation, especially during 2021-2022, these numbers would mostly look a lot worse. Plus, in the Asia-Pacific region, debt has simultaneously increased 192.2% while growing “just” 48.6% in the Americas and 8.7% in EMEA.

The United States still holds the crown for most millionaires, but the European, Middle Eastern, and African regions boast the highest wealth per adult in USD terms, driven primarily by oil-heavy regions like the Middle East and Norway.

If I were in poverty, I’d be really scared. Before the 20th century, almost everyone in the entire world lived in extreme poverty according to UN standards. In 2023, that number sits at just 9.7%.

It’s almost like capitalism works or something…

What's Ripe

D.R. Horton (DHI) 10.1%

• Don’t worry, apes—although buying a home in the U.S. is near impossible these days, homebuilders are still doing great. Just check out D.R. Horton’s report.
• The nation’s largest homebuilder reported a 2.9% beat on the top line, which led to a 7.9% beat on the bottom, despite missing on total units sold.
• Wall Street’s eyes were focused on the 24% gross margin reported on higher sale prices as well as a newly announced $4bn share repurchase program.

Meta Platforms (META) 3.0%

• Zuck is readying the world for the biggest ever “How do you do, fellow kids?” as Meta plans to invest in the firm that just days ago agreed to acquire Supreme.
• Meta is considering a minority stakein EssilorLuxottica, the world’s largest eyewear maker, to continue pursuing VR/AR glasses.
• I thought VR died with C-19 and NFTs back in 2021. But apparently not, and the market is loving it.

What's Rotten

Domino’s Pizza (DPZ) -13.5%

• There’s a serious bear market in drunk food ordering, the most flashing-red recession signal I could ever imagine. And Domino’s is patient zero.
• Revenue in Q2 missed estimates by a slight 0.6%, while EPS trounced estimates by 31% on 4.2% growth in U.S. same-store sales and 1.5% hikes to menu prices.
• 80% of that growth came from China, meaning other regions are downbad. Most of Thursday’s decline comes from this and cutting expected net new openings from 925 to 175-275 by year-end.

Darden Restaurants (DRI) -3.1%

• It was a bad day to be a restaurant on Thursday. And, an even worse one to make stupid acquisitions. Nonetheless, Darden went for it, acquiring Chuy’s.
• Chuy’s is a sit-down Tex-Mex eatery based out of Austin. Darden announced plans to purchase the company for $605mn, or $37.50/sh, a 40%premium.
• In 2023, Chuy’s earned ~$450mn in revenue, meaning the sale is being done at a 1.3x P/S. That doesn’t seem too bad for adding 100 locations across 15 states.

Thought Banana

Boxes vs Box Office

Few things give humans more joy in life than staring at screens all day.

That has to be right, given it’s what most of us do for upwards of 16 hours/day. But the more important question is what kind of screen you’re staring at.

And as it turns out, the box-shaped screens in our living and bedrooms have started to dominate the big screens in movie theaters. Let’s see how bad it’s gotten in 2024.

What Happened?

2023 gave movie theater operators a reason to live once again as blockbuster movies like Barbie and Oppenheimer promised to revive the theater industry post-pandemic.

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Turns out, they were liars. While both movies did well, this hasn’t (yet) led to the Renaissance many were hoping for in big-screen productions.

Total box office revenue in 2023 hit levels roughly in line with that of the early 2000s. In 2024, only Disney’s Inside Out has managed to cross the >$1bn box office revenue mark.

Even meant-to-be blockbusters like Dune 2, and Civil War only generated a combined total of $835mn, $711mn of which belonged to Dune 2 alone.

At the same time, and especially last month, streaming activity set record highs on a monthly basis.

Source

At 40.3% of total TV watching time, streaming services hit a record-high proportion of total viewership.

Surprisingly, NFLX didn’t even top the list of most watched streaming services, with YouTube TV coming in 1.5% higher at 9.9%.

Live sports and other content are leading the way for YouTube TV—hence NFLX’s lean-in to live content like the Roast of Tom Brady and Joe Rogan’s upcoming live “comedy” special and the Paul-Tyson fight in November.

The Takeaway?

Movie theaters are gonna need to reinvent themselves—and fast—to have any chance of survival going forward.

Consumers have shown a liking towards experiential retail. Themed theaters and events, like if Disney bought a theater and had characters walking around or if a chain had a “Minion Night” on the release of Despicable Me 4, they may see improvements, despite those minions being more insufferable than hearing the words “Hawk Tuah” again.

But, for now, it seems like YouTube TV and NFLX will remain the Grim Reaper to this relic of past media consumption. I wonder what comes next…?

The Big Question: Do movie theaters have any chance of survival over the next decade or so? How long will it take for cable to reach the same fate?

Banana Brain Teaser

Previous

A photography dealer ordered 60 Model X cameras to be sold for $250 each, which represents a 20 percent markup over the dealer’s initial cost for each camera. Of the cameras ordered, 6 were never sold and were returned to the manufacturer for a refund of 50 percent of the dealer’s initial cost. What was the dealer’s approximate profit or loss as a percent of the dealer’s initial cost for the 60 cameras?

Answer: 13% profit

Today

Seven pieces of rope have an average (arithmetic mean) length of 68 centimeters and a median length of 84 centimeters. If the length of the longest piece of rope is 14 centimeters more than 4 times the length of the shortest piece of rope, what is the maximum possible length, in centimeters, of the longest piece of rope?

Send your guesses to [email protected]

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Risk comes from not knowing what you’re doing.

Warren Buffett

How Would You Rate Today's Peel?

All the bananas

Meh

Rotten AF

Happy Investing, David, Vyom, Jasper & Patrick