Los Angeles: Walt Disney has cautioned investors about a potential ‘moderation in demand’ for its theme park business in the upcoming quarters, overshadowing recent successes in its animated film division and television operations. The company’s stock fell 3% on Wednesday following the announcement.
Disney anticipates a ‘mid single-digits’ decline in operating income for its parks segment in the fiscal fourth quarter. Chief Financial Officer Hugh Johnston mentioned, “We expect to see a flattish revenue number in Q4 coming out of the parks. It’s really just a few quarters. I don’t think I would refer to it as protracted.”
Technology and media analyst Ben Barringer from Quilter Cheviot commented that the park results add to concerns about a slowing U.S. economy. He noted, “Coupled with other travel companies recognizing poor growth, it is clear people are scaling back their spend when it comes to tourism and recreation.” Barringer attributed some of the downturn to Disneyland Paris struggling with the impact of the Olympics and China’s ongoing economic challenges.
Despite this, Disney’s Entertainment unit saw a nearly threefold increase in operating income for the April-June period. The company’s streaming services, including Disney+, Hulu, and ESPN+, achieved profitability for the first time. However, the experiences segment, encompassing parks and consumer products, saw a 3% drop in operating income. Disney forecasts a continued decline in this segment, with operating income expected to fall by ‘mid single digits’ in the July-September quarter compared to the previous year.
For the fiscal third quarter, Disney reported adjusted earnings per share of $1.39, surpassing analyst estimates of $1.19. Revenue increased by 4% to $23.2 billion, exceeding forecasts of $23.1 billion. CEO Bob Iger highlighted the success of the entertainment division, stating, “We are confident in our ability to continue driving earnings growth through our collection of unique and powerful assets.”
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Iger is focused on revitalizing Disney after facing substantial losses in streaming, a decline in traditional television, and challenges for its film studio. The studio has recently shown signs of recovery, with “Inside Out 2” earning $1.6 billion globally and “Deadpool & Wolverine” bringing in over $850 million.
MoffettNathanson media analyst Robert Fishman noted, “After several years of misfires and muted successes, Disney has now in the span of a month and a half released the highest-grossing animated film of all time and achieved the largest-ever opening for an R-Rated film.” Fishman also expressed optimism about upcoming releases, including “Moana 2” and “Mufasa: The Lion King” directed by Barry Jenkins.
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The Entertainment division, encompassing film, television, and streaming, reported operating income of $1.2 billion for the quarter. The streaming services collectively generated an operating profit of $47 million. The Sports unit, including ESPN and Star India, achieved operating income of $802 million, though this was a 6% decline from the previous year due to increased costs for airing cricket matches.
The experiences unit reported operating income of $2.2 billion, with domestic parks seeing a decrease in demand. However, cruise ships and some international parks showed improved results.
