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Disney on Wednesday warned of softness in its theme park business in the third quarter.
Disney’s Experiences segment, the business unit that houses its theme parks, cruises and consumer products, generated revenue of nearly $8.39 billion and operating income of $2.22 billion in the three-month period. These results represented a 2% increase and a 3% decrease year-over-year, respectively.
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“Segment revenue growth was driven by a moderation in consumer demand towards the end of the third quarter that exceeded our previous expectations,” the company said.
Walt Disney Studios in Burbank, California on February 9, 2023. (Eric Thayer/Bloomberg via Getty Images/Getty Images)
For its indoor parks, Disney reported its performance was “down modestly,” but also posted “comparable” attendance and higher per capita spending. Meanwhile, Disney Cruise Line, Consumer Products and some of its international theme parks posted year-over-year gains, according to the company.
“I want to point out that we actually had 2% revenue growth in the third quarter,” CFO Hugh Johnston said while speaking to analysts and investors on Wednesday morning. “The reason, obviously, is that the IP is so strong in our parks. It really attracts a strong audience and people are reluctant to cancel holidays. So although we’ve seen a slight moderation in demand, we certainly won’t I call it a significant change”.
The company said local the moderation of demand may affect the next quarters.
People walk in front of Cinderella’s castle at the Magic Kingdom Park at Walt Disney World in Orlando, Florida, on May 31. (Gary Hershorn/Getty Images/Getty Images)
“While we are actively monitoring guest attendance and spending and aggressively managing our cost base, we expect Q4 Experiences segment operating income to decline by a mid-point compared to last year, reflecting these underlying dynamics as well as impacts to Disneyland Paris from a reduction in normal consumer travel due to the Olympics and some cyclical easing in China,” the company said.
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Johnston said he would “call it a slowdown that’s being more than offset by the entertainment business, both from what we’ve seen so far and our expectations for ‘Moana 2’ as well as ‘Mufasa’.”
During the call, Disney’s CFO also noted that “the lower-income consumer is feeling a little bit of stress” and “the higher-income consumer is traveling a little more abroad.”
“I think you’re just going to see more of a continuation of those trends in terms of the top line, and then the bottom line is going to reflect the fact that we have some one-time costs that come in and out. both this year and past,” he said of the theme parks. “I expect to see international strengthening.”
Bookings for Disneyland Paris “will certainly look good” after the Olympics, which are being held in the French capital, are over, Johnston added. That park has “felt a challenge” during the Games.
The Olympics are scheduled to end on Sunday. The subsequent Paralympic Games will be held from August 28 to September. 8.
Meanwhile, Disney’s other two segments — entertainment and sports — brought in $10.58 billion and $4.56 billion in revenue, respectively. Their operating income was 1.2 billion and 802 million dollars.
Attendees are reflected in the Disney+ logo during the Walt Disney D23 Expo in Anaheim, Calif., on September 9, 2022. (Patrick T. Fallon/AFP via Getty Images/Getty Images)
Its combined direct-to-consumer streaming businesses — Disney+, Hulu and ESPN+ — posted a remarkable $47 million in operating profit for the third quarter, the first time it has reached profitability.
The company brought in $23.2 billion in total revenue during the quarter, with diluted earnings per share coming in at $1.39. Both were higher than Wall Street estimates.
The headline of an earlier version of this story incorrectly stated that Disney theme park attendance was down.