Walt Disney has forecast a decline in theme park revenue and operating income for its parks segment, overshadowing the company’s recent successes in the film and television sectors. The warning comes despite a strong performance by the animated Pixar film Inside Out 2 and a profitable quarter for Disney’s streaming services.
Disney’s stock fell by 1.1% following the announcement within 24 hours of dropped stock news. The company projects that operating income from its parks will decrease by “mid-single-digits” in the fiscal fourth quarter, with revenue expected to remain relatively flat. Chief Financial Officer Hugh Johnston reassured investors that the downturn will not likely be prolonged, describing it as temporary.
Analysts attribute the challenges at Disney’s parks to broader economic pressures, including inflation and a slowing U.S. economy. Ben Barringer, a technology and media analyst at Quilter Cheviot, noted that reduced consumer spending on travel and recreation affects Disney and other travel and tourism companies.
The experiences segment, encompassing both parks and consumer products, saw a 3% drop in operating income despite accounting for more than half of Disney’s profits. In contrast, Disney’s Entertainment unit—comprising film, television, and streaming—reported a nearly threefold increase in operating income. This growth is driven by profitability in its streaming services, including Disney+, Hulu, and ESPN+, which achieved a combined profit for the first time.
Analysts highlight the significance of Disney’s profitability in its streaming division, noting that it represents a significant milestone after years of substantial losses. Disney’s focus on creative content, including the successful Inside Out 2 and the strong performance of new releases like Deadpool & Wolverine, has bolstered its position in the market.
Disney’s fiscal third-quarter results showed adjusted earnings per share of $1.39, exceeding analyst expectations of $1.19. Revenue increased by 4% to $23.2 billion, surpassing forecasts of $23.1 billion. CEO Bob Iger emphasized the growth in consumption and the strategic pricing leverage Disney has gained through its popular content offerings. Despite these successes, Disney faces challenges in its Sports unit, where operating income fell by 6% to $802 million due to rising costs associated with airing cricket matches. Additionally, the Experiences unit reported an operating income of $2.2 billion but is experiencing a “moderation” in domestic demand and increased costs related to new technology and consumer offerings. The upcoming quarter may see further impact from the Olympics and softening business conditions in China.
