Disney Profits Leap

[Carol]

Disney Profits Leap 54 Percent
By Jason Garcia, Orlando Sentinel

February 8, 2011

A rebound in its theme parks during the final three months of 2010 helped propel the Walt Disney Co. to 54 percent quarterly profit growth, the company announced Tuesday.

Disney said it made $1.3 billion for the three months that ended Jan. 1, the first quarter in the company's fiscal year, up from $844 million a year earlier. Companywide revenue rose 10 percent to $10.7 billion.

The results easily topped Wall Street expectations.

"It's a great start to a new fiscal year," Disney Co. President and Chief Executive Officer Bob Iger said.

Disney's theme-parks business, often viewed as a bellwether for the U.S. economy, turned in its strongest performance since being dragged down by the recession three years ago: The unit posted a 25 percent increase in operating profit — to $468 million — on sales growth of 8 percent — to $2.9 billion.

It was the first quarterly profit growth for Walt Disney Parks and Resorts in two-and-a-half years.

The improvement was driven primarily by gains in guest spending, as Disney continued to pull back the discounts it had used to sustain the business during the recession, and guests bought more souvenirs and food. Combined guest-spending at Walt Disney World and Disneyland climbed 8 percent for the quarter.

But attendance also perked up, by 2 percent, between the two coasts, despite disruptive weather during the quarter that included heavy rains in Southern California and a post-Christmas blizzard that grounded air travel across the Northeast.

Although it did not provide specific figures, Disney said Disney World attendance was up "more than 2 percent" during the quarter while Disneyland, in Anaheim, Calif., was "slightly down" from last year. Disney suggested its Orlando theme parks are benefitting from the huge crowds being drawn to the region by Universal Orlando's hit Wizarding World of Harry Potter.

"They built a great property down there," Iger said during a conference call with analysts. "And I believe when a competitor puts a good property in the marketplace, it brings more people to the market. So I think it stimulates attendance to Orlando and we all know that's good for us. Because we usually get a good piece of all visitation to Orlando."

Combined occupancy in Disney's domestic hotels — roughly 90 percent of which are in Orlando — rose 4 percentage points during the quarter to 85 percent. Average room spending also climbed 4 percent, in a further reflection of the reduced discounting.

Attendance, spending and occupancy also rose at Disney's international resorts.

The increases were partially offset by a decline at Disney Cruise Line, where expenses rose leading up to the January launch of the 4,000-passenger Disney Dream cruise ship and scheduled dry-dock maintenance on one of the company's two existing vessels.

Disney, which is the midst of protracted negotiations with a union representing 20,000 full-time workers at Disney World, also said that the parks division's labor, pension and health-care costs rose during the quarter.

Disney said its gains have continued into this year. Room reservations in its U.S. hotels are currently pacing 3 percent ahead of a year ago piece during Disney's second fiscal quarter.

Still, Iger said consumers haven't completely reverted to the pre-recession habits. He noted that travelers have not yet, for instance, begun booking their trips further ahead of their travel dates.

"You still have an environment that, while less challenging certainly than it was a year ago, still has its challenges," Iger said, though he added that Disney's parks business is better positioned than in previous downturns for a recovery because it has more cheaply priced — or "value" category — hotel rooms.

"We're more accessible and we're more accessibly priced than we were" following the 2000-2001 recession, he said.

Executives also said repeatedly that they are thrilled with early results for the Dream, the first of two new cruise ships Disney is building at a cost of more than $1.8 billion. Disney the ship, which launched last month and can carry nearly 50 percent more passengers than Disney's first two cruise ships, is already 89 percent booked for the year.

"We believe that the fact that the Dream is so booked, particularly during peak periods, has actually driven people whose interest was sparked in part by the addition of the new ship to our other ships and our other itineraries," Iger said.

Analysts have said one of the biggest risks facing Disney's cruise-fleet expansion is that the new ships could cannibalize bookings on the first two vessels.

The Dream is "just blowing the doors off in terms of demand and interest," added Disney Co. Chief Financial Officer Jay Rasulo.

Disney's best-performing business during the quarter was its film studio, where operating profit climbed 54 percent to $375 million thanks to cost-cutting, international DVD sales of the hit movie "Toy Story 3," and fewer poorly performing films.

At Disney's media networks, the company's largest business, operating profit leapt 47 percent to just under $1.1 billion. Disney credited increased ad and affiliate sales at both the cable channels ESPN and Disney Channel.

Operating profit at Disney's consumer-product segment rose 28 percent to $312 million, thanks primarily to sales of Toy Story and Marvel merchandise and improvements at Disney Store North America.

Operating losses at Disney's smallest division, interactive media, grew from $10 million last year to $13 million, as what Disney called strong sales of the console games Epic Mickey and Toy Story 3 were more than offset by the inclusion of Playdom, the recently acquired social-media games developer. Disney recently laid off nearly 200 employees in its video-game unit.

[princessgirls]

Maybe a new parade on the horizon...

The Disney Happy Day were making money parade!

Just kidding....

Julie

[PopPhan]

Maybe a new parade on the horizon...

The Disney Happy Day were making money parade!

Just kidding....

Julie

More likely, the thought pattern will be "Now we can stop all these discounts and promotions, cut back on staffing/rehabs/upgrades/additions, put out more generic merchandise, and make even MORE money!!"

[princessgirls]

Yeah...The Look at What we do when we scale back, put cheap merchandise out, jack up the prices of food and beverages, cut back on quality, cut back on employee hours, etc.

It will all come back to bite them, eventually.

Julie

[shadowden]

This is great news! Make money, spend money. Spend money, make more jobs. Make more jobs, spend more money...

It's a vicious circle...

[PopPhan]

This is great news! Make money, spend money. Spend money, make more jobs. Make more jobs, spend more money...

It's a vicious circle...

Somebody better tell businesses how this works!!! Seems like most have forgotten.

[Ian]

This is great news! Make money, spend money. Spend money, make more jobs. Make more jobs, spend more money...

It's a vicious circle...

I think the cycle is more like, "Make money, pay executives outrageous bonuses, cut back more, make more money, pay bigger outrageous bonuses."

[DizneyRox]

I didn't want to be the first to say it. For Disney though, making more money absolutely doesn't translate to reinvestment into the parks or other business segments. It means they will need to cut more because they will need to make more money next quarter. It's all about double digit growth [in profits]!

[PopPhan]

I didn't want to be the first to say it. For Disney though, making more money absolutely doesn't translate to reinvestment into the parks or other business segments. It means they will need to cut more because they will need to make more money next quarter. It's all about double digit growth [in profits]!

Unfortunately, it's not just Disney!!

[Ian]

I didn't want to be the first to say it. For Disney though, making more money absolutely doesn't translate to reinvestment into the parks or other business segments. It means they will need to cut more because they will need to make more money next quarter. It's all about double digit growth [in profits]!

Unfortunately, it's not just Disney!!

Agree on both counts. It's Corporations period ... bottom line thinking reigns supreme these days.

[joonyer]

On one hand we don't want Disney to make big profits, because that means they're charging us too much. We want them to lose money so they'll offer deep discounts, but then they will not invest much in new attractions and park upkeep. Isn't it funny that we don't want them them making big profits, but we don't don't really want them to lose money either. Unless we are Disney stockholders, of course, and who are the executives beholden and obligated to? Stockholders of course. It baffles me how so many Americans now equate making profits with corporate greed, when making profit is the backbone of the free market capitalist economy that made America such a great nation. No profits equals no jobs equals poverty for everyone. Personally, I hope Disney makes a TON of profits and spends a lot of it making WDW and even better place to visit.

[johnO]

They are expanding Fantasyland.....

[Ian]

On one hand we don't want Disney to make big profits, because that means they're charging us too much. We want them to lose money so they'll offer deep discounts, but then they will not invest much in new attractions and park upkeep. Isn't it funny that we don't want them them making big profits, but we don't don't really want them to lose money either. Unless we are Disney stockholders, of course, and who are the executives beholden and obligated to? Stockholders of course. It baffles me how so many Americans now equate making profits with corporate greed, when making profit is the backbone of the free market capitalist economy that made America such a great nation. No profits equals no jobs equals poverty for everyone. Personally, I hope Disney makes a TON of profits and spends a lot of it making WDW and even better place to visit.

Whoa whoa whoa ... you're twisting what people are saying here. No one (least of all me, who is one of the biggest die-hard capitalists on the planet) is saying that it's not right (and required) for companies to pursue profits.

What I'm saying is that I take issue with the way corporations (including the Walt Disney Company) choose to pursue profits. Long term thinking is gone from corporate America, because all you have running these massive companies are guys with MBAs who want to get rich quick and then retire on an island somewhere. They don't care a lick about the long term health and well being of the company ... all they care about is the stock price (so they can exercise their options and hit paydirt).

That's my problem with it. Profits are great, yeah, but too often today they come at the expense of the consumer so the execs can line their pockets. If it keeps up the way it is, eventually Disney World will be a turnstile, a guy who grabs you by the heels, turns you upside down and shakes the money out of your pockets, followed immediately by another turnstile!

[PopPhan]

They are expanding Fantasyland.....

True, but this was in process even before they started having "good" numbers. It was, to be honest, in response to the addition of WWoHP at Universal.

Originally Posted by joonyer View Post
On one hand we don't want Disney to make big profits, because that means they're charging us too much.We want them to lose money so they'll offer deep discounts, but then they will not invest much in new attractions and park upkeep. Isn't it funny that we don't want them them making big profits, but we don't don't really want them to lose money either. Unless we are Disney stockholders, of course, and who are the executives beholden and obligated to? Stockholders of course. It baffles me how so many Americans now equate making profits with corporate greed, when making profit is the backbone of the free market capitalist economy that made America such a great nation. No profits equals no jobs equals poverty for everyone. Personally, I hope Disney makes a TON of profits and spends a lot of it making WDW and even better place to visit.

jooyner: In the first bolded section above - I, for one, am not all that concerned with 'deep discounts' or that they are 'charging us too much' -- they charge what the market will bear, and that is perfectly fine by me. That IS the spirit of Capitalism.

In the second bolded point, again in my own opinion, I do not begrudge the company 'big' profits - IF they are investing back into the company -- which includes properties, infrastructure, and personnel (both in numbers and in salaries.)

The third point in bold above highlights one of my previous points -- companies, including Disney, are currently NOT adding jobs in numbers to enhance, or offset, their increasing profits. THAT is what I equate to 'Corporate Greed" - the unwillingness to reinvest/expand during these slow economic times.

All that said, the FE, Art of Animation Resort, CA revamp, Aulani, etc., are all GOOD things and I applaud Disney for making these moves (although, in my opinion they could have begun about a year earlier than they did) and hope they continue in this vein. What I would like to see is an increase in staffing (yes, I know all about the dearth of "talent" in the central Florida region) and increases in salaries of those on the front lines commensurate with the increases in profits from the parks.

[shadowden]

I think the cycle is more like, "Make money, pay executives outrageous bonuses, cut back more, make more money, pay bigger outrageous bonuses."

I didn't want to be the first to say it. For Disney though, making more money absolutely doesn't translate to reinvestment into the parks or other business segments. It means they will need to cut more because they will need to make more money next quarter. It's all about double digit growth [in profits]!

Unfortunately, it's not just Disney!!

Cynics...

[shadowden]

If it keeps up the way it is, eventually Disney World will be a turnstile, a guy who grabs you by the heels, turns you upside down and shakes the money out of your pockets, followed immediately by another turnstile!

Interesting visual...

[disneyboundagain]

Wait a minute, everyone is missing the point that Disney profits are up because "...huge crowds being drawn to the region by Universal Orlando's hit Wizarding World of Harry Potter." This is a sad day. In my opinion, the only reason Universal was able to become so successful is because Disney pulled the crowds to the Orlando area. Is this the beginning of a paradigm shift? I sure hope not.

[DizneyRox]

If it keeps up the way it is, eventually Disney World will be a turnstile, a guy who grabs you by the heels, turns you upside down and shakes the money out of your pockets, followed immediately by another turnstile!

Interesting visual...

And Disney will call it a new ride in an attempt to attract more guests...

Is this the beginning of a paradigm shift? I sure hope not.

You mean Universal outdoing Disney? That happened back when IOA first opened up.

[Tekneek]

Being profitable means you get to keep your doors open and stay in business. The rat wheel that Wall Street wants businesses on, though, is unsustainable and unhealthy.

[Ian]

Being profitable means you get to keep your doors open and stay in business. The rat wheel that Wall Street wants businesses on, though, is unsustainable and unhealthy.

BINGO!! Exactly what I was trying to say.

And really ... no need to speculate that it's unsustainable. I'm pretty sure we have an economic crisis of epic proportions going on right now that proves the point unequivocaly.