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Disney on Wednesday warned of softness in its theme-park business in the third quarter.
Disney’s Experience division, the business unit that includes its theme parks, cruises and consumer products, generated nearly $8.39 billion in revenue and $2.22 billion in operating income during the three-month period. Those results are a 2% year-over-year increase and a 3% decrease, respectively.
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“Segment revenue growth was impacted by moderating consumer demand at the end of the third quarter, which exceeded our earlier expectations,” the company said.
February 9, 2023 at Walt Disney Studios in Burbank, California. (Eric Thayer/Bloomberg via Getty Images/Getty Images)
For its domestic parks, Disney reported a “modest decline” in performance 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, the company said.
“I want to emphasize that we actually had 2% revenue growth in Q3,” CFO Hugh Johnston said in a call with analysts and investors on Wednesday morning. “The reason, obviously, is that IP is very strong in our parks. It draws really strong visitors and people are reluctant to cancel vacations. So, even if we see a slight moderation in demand, I certainly wouldn’t call it a significant change.”
The company said domestically Demand moderation may affect the next few quarters.
People walk in front of Cinderella’s Castle at the Magic Kingdom Park at Walt Disney World on May 31 in Orlando, Florida. (Gary Hershorn/Getty Images/Getty Images)
“While we aggressively monitor arrivals and guest spending and aggressively manage our cost base, we expect Q4 Experiences segment operating income to decline by mid-single digits from the prior year due to normal consumer travel due to the Olympics and some cyclical softening in China,” the company said.
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Johnston said, “What we’ve seen so far and both ‘Mona 2’ and ‘Mufasa’ is what I would call a bit of a letdown more than compensated for by the entertainment business.”
During the call, the Disney CFO also noted that “low-income consumers are feeling a little more stress” and “higher-income consumers are traveling a little more internationally.”
“I think you’re going to see more of a continuation of those trends in terms of the top line, and then the bottom line will reflect some one-time costs coming in and going out for us. This year and last year,” he said of the theme parks. “I expect the international to get stronger.”
Johnston added that bookings for Disneyland Paris will “definitely be good” once the Olympics in the French capital are over. That park “felt a bit of a challenge” during the Games.
The Olympics ends on Sunday. The Paralympic Games will continue from August 28 to September. 8.
Meanwhile, Disney’s other two divisions — entertainment and sports — generated revenue of $10.58 billion and $4.56 billion, respectively. Their operating income is between $1.2 billion and $802 million.
Attendees reflect on the Disney+ logo during the Walt Disney T23 Expo on September 9, 2022 in Anaheim, California. (Patrick D. Fallon/AFP via Getty Images/Getty Images)
Its combined direct-to-consumer streaming businesses — Disney+, Hulu and ESPN+ — notably posted an operating profit of $47 million in the third quarter, the first time it reached profitability.
The company generated $23.2 billion in total revenue for the quarter, with diluted earnings per share of $1.39. Both were above Wall Street estimates.
An earlier version of this story’s headline incorrectly stated that Disney’s theme park attendance had fallen.
