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Disney on Wednesday warned of softness in its theme-park business in the third quarter.
Disney’s Experience segment, the business unit that houses its theme parks, cruises and consumer products, generated revenues of nearly $8.39 billion and operating income of $2.22 billion in the three-month period. Those results represented a 2% increase and 3% decrease year over year, respectively.
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“Segment revenue growth was impacted by moderation of consumer demand towards the end of Q3 that exceeded our previous expectations,” the company said.
Walt Disney Studios in Burbank, California, on Feb. 9, 2023. (Eric Thayer/Bloomberg via Getty Images / Getty Images)
For its domestic parks, Disney reported its performance “decreased modestly” but also posted “comparable” attendance and higher per-capita spending. Meanwhile, Disney Cruise Line, Consumer Products and some of its international theme parks notched year-over-year gains, according to the company.
“I want to emphasize we actually had 2% revenue growth in Q3,” CFO Hugh Johnston said while speaking with analysts and investors on Wednesday morning. “The reason, obviously, is the IP is so strong in our parks. It really does attract a strong audience and people are reluctant to cancel vacations. So, while we saw a slight moderation in demand, I certainly wouldn’t call it a significant change.”
The company said the domestic demand moderation could affect the next few 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 attendance and guest spending and aggressively managing our cost base, we expect Q4 Experiences segment operating income to decline by mid-single digits versus the prior year, reflecting these underlying dynamics as well as impacts at Disneyland Paris from a reduction in normal consumer travel due to the Olympics, and some cyclical softening in China,” the company said.
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Johnston said he “would just call this as a bit of a slowdown that’s being more than offset by the entertainment business, both what we’ve seen so far and our expectations for ‘Moana 2’ as well as ‘Mufasa.’”
During the call, the Disney CFO also noted the “lower-income consumer is feeling a little bit of stress” and the “high-income consumer is traveling internationally a bit more.”
“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 will be reflective of the fact that we’ve got some one-time costs coming in and going out both this year and last year,” he said of the theme parks. “I do expect to see international strengthen.”
Bookings for Disneyland Paris “will certainly look good” once the Olympics, being hosted in the French capital, come to an end, Johnston added. That park has “felt some challenge” during the Games.
The Olympics are slated to end Sunday. The subsequent Paralympics will run from Aug. 28-Sept. 8.
Meanwhile, Disney’s two other segments — entertainment and sports — brought $10.58 billion and $4.56 billion in revenue, respectively. Their operating incomes were $1.2 billion and $802 million.
Attendees are reflected in the Disney+ logo during the Walt Disney D23 Expo in Anaheim, California, on Sept. 9, 2022. (Patrick T. Fallon/AFP via Getty Images / Getty Images)
Its combined direct-to-consumer streaming businesses — Disney+, Hulu and ESPN+ — notably notched $47 million in operating profit for the third quarter, its first time reaching profitability.
The company brought in $23.2 billion in total revenues during the quarter, with its 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 said Disney’s theme park attendance slumped.