Disney profit sinks 7%

[CR Resort Fan 4 Life]

http://www.orlandosentinel.com/the-...earnings-4th-quarter-20101111,0,1156668.story

By Jason Garcia, Orlando Sentinel
7:44 p.m. EST, November 11, 2010

Walt Disney Co. profit sank 7 percent during the final three months of its fiscal year, disappointing Wall Street as one-time adjustments dragged down the company's television networks and theme parks and more than offset gains from the blockbuster movie "Toy Story 3."

Business remained soft at Walt Disney World during the July-through-September period, though the company said the resort's fall bookings are beginning to pick up.

"Overall, we're encouraged by many of the trends we're seeing in our businesses," Disney Co. Chief Financial Officer Jay Rasulo said during a Thursday afternoon conference call with analysts.

Disney made $835 million during the quarter, which ended Oct. 2, down from $895 million last year. Revenue dipped 1 percent to $9.7 billion.

The results were hampered by the timing of certain revenue at the ESPN cable-TV network and a quirk in the company's accounting calendar that left this year's fiscal fourth quarter with one less week than last year's fourth quarter.

Disney's full-year profit leapt 20 percent to just under $4 billion on revenue that was up 5 percent to $38.1 billion, thanks in large part to continuing advertising and affiliate-fee gains at ESPN and a slate of hit films that included "Toy Story 3," "Alice in Wonderland" and Marvel Entertainment's "Iron Man 2."

Disney President and Chief Executive Officer Bob Iger called the year "a good one financially and strategically for our company."

It was another difficult one, however, for the company's theme-park unit. Operating income at Walt Disney Parks and Resorts fell 7 percent for the year, to $1.3 billion — the only one of Disney's five main segments in which profit fell. Sales inched up 1 percent to $10.8 billion.

That annual performance included a fourth quarter in which operating profit sank 8 percent to $316 million on revenue of $2.8 billion, down 1 percent from a year earlier. Disney blamed the shrunken quarterly profit on rising labor costs and pension obligations at Disney World and Disneyland, and on falling sales at Disney Vacation Club, its time-share arm.

The park results were also depressed by the calendar shift that left the company with one less week of operations than it had a year ago in the fourth quarter. For example, combined attendance at Disney World and Disneyland fell 6 percent compared with last year's fourth quarter — but when the effect of last year's extra week was stripped out, this year's attendance actually inched up 1 percent compared with 2009.

The biggest attendance gains occurred at Disney California Adventure, the second theme park at Disneyland, where Iger said attendance has risen 20 percent since a new water-and-light show's debut in June. Disney said attendance fell for the full year at Disney World, though it did not say by how much.

Hotel occupancy slipped one percentage point to 83 percent at Disney World during the quarter and was flat at 84 percent at Disneyland.

Still, company executives said they saw several promising trends during the quarter. Per capita guest spending in Disney's U.S. theme parks rose 6 percent and per-room hotel revenue gained 5 percent as the company continued pulling away from the heavy discounting employed during the global recession.

Disney is still discounting more than normal in its theme parks. "But what we're seeing in the marketplace today is even those promotions are a slightly shorter duration than they had been, and slightly better pricing than they had been," Iger said. "And we hope that we continue to trend more in that direction."

Also encouraging: Disney said hotel reservations in its fiscal first quarter are currently are running 5 percent ahead of last year's pace, and average room rates are up "mid-single digits."

Hal Vogel, a stock analyst who studies the entertainment industry, cautioned that Disney's bookings are closely tethered to the overall economy and could dip if consumer confidence weakens.

But he added: "I think it's OK, given what we've got right now in terms of the overall situation of most consumers."

Abe Pizam, dean of the University of Central Florida's Rosen College of Hospitality Management, said the improvement in Disney's future bookings are further evidence that a recovery has taken hold in Orlando's tourism industry. Pizam noted that many other area hoteliers are reporting big gains in average occupancy, lifted in large part by the strength of Universal Orlando, where attendance skyrocketed 36 percent during the July-through-September quarter following the opening of the Wizarding World of Harry Potter in its Islands of Adventure theme park.

"Everybody says we're seeing a recovery," Pizam said. "It's no longer something we wish for or hope for. It's here.

"Is it exactly what it was two or three years ago? No," he added. "But it's much better than it was, and it's increasing."

Beyond its theme parks, Disney Co.'s best performing segment during the fourth quarter was its movie studio, which whipsawed from a $13 million operating loss a year ago to a $104 million operating profit. The studio's operating profit for the full year was $693 million, a nearly fourfold increase from a year earlier.

Operating profit at Disney's media networks, which include ESPN, tumbled 18 percent from last year to $1.2 billion during the quarter but climbed 8 percent to $5.1 billion for the year.

At Disney's consumer-products division, operating profit rose 22 percent for the quarter to $182 million and 11 percent for the year to $677 million. And in its interactive-media unit, Disney's newest and smallest segment, the operating loss shrank 9 percent to $104 million during the quarter and 21 percent to $234 million for the year.

Disney's financial results were prematurely released before the 4 p.m. close of the stock market, triggering a quick drop in the company's share price. Disney said it is investigating the error.

Jason Garcia can be reached at jrgarcia@orlandosentinel.com and 407-420-5414.

 

[mcd2745]

Again, the comments indicate decreasing the discounts/promos. However, with attendance and occupancy relatively flat (even with all the discounts), I don't see how they can do it. It's not like attendance and occupancy are sky-rocketing to where they don't need the promotions anymore.

 

[DC7800]

The biggest attendance gains occurred at Disney California Adventure, the second theme park at Disneyland, where Iger said attendance has risen 20 percent since a new water-and-light show's debut in June. Disney said attendance fell for the full year at Disney World, though it did not say by how much

Universal Orlando, where attendance skyrocketed 36 percent during the July-through-September quarter following the opening of the Wizarding World of Harry Potter in its Islands of Adventure theme park

You don't suppose that Disney might actually and finally realize that the way to drive theme park attendance is not through discounting, promotions, annual celebrations, or giving away free food, but rather by providing new and interesting experiences that the guests really want to see (and - even in a recession - will spend big bucks to do so)? Nothing major new at Walt Disney World for the second year in a row - attendance down for the year; California Adventure, with the new and hyped World of Color - attendance since up twenty percent. Universal, with Harry Potter, up 36 percent.

Now, of course, the presence or lack of new attractions is hardly the only factor at work here, but you would think even the executives at Disney ought to be able to figure this one out.


The Fantasyland redo could be the greatest thing since sliced bread, and it still won't make up for three or four years lack of investment.

 

[Disco]

Well, I tend to avoid the parks when there is so much construction going on. I'm suprised Disney stayed overall flat in a down economy on top of that. I'm shocked that DCA attendance grew so much as that place is a construction nightmare. The new show is great I'm sure but the rest of the park is in shambles. Imagine what it will be like with LM and cars land done.
Went down to DL a couple weeks ago and skipped DCA even though I was curious about the new water show.
DL/DCA is a different beast as it is mostly local dependent.
IMO WDW needs to be doing something major updates like this at one of its parks every other year. Doesn't even have to be an added attraction just revamp and update needy areas. At 500 million a year they would pump up attendance at least 10%. Someone would have to crunch the numbers for me to see if that is worth it but I bet it is.

 

[Maistre Gracey]

We still visit WDW often.... but not quite as often as we used to due to the closing of the Adventurers Club, and lack of nightlife in general.

MG

 

[zulemara]

we still visit wdw often.... But not quite as often as we used to due to the closing of the adventurers club, and lack of nightlife in general.

Mg

ding ding ding!

 

[TheRustyScupper]

You don't suppose that Disney might actually and finally realize that the way to drive theme park attendance is not through discounting, promotions, annual celebrations, or giving away free food, but rather by providing new and interesting experiences that the guests really want to see

1) Heresy !
2) Blasphemy !
3) This is now a corporate culture.
4) The guests/customers are at least fifth or sixth on the list of importance.
. . . #1 is profit
. . . #2 is corporate bonuses
. . . #3 is corporate pay increases
. . . #4 is executives keeping their jobs
5) In thinking about others, maybe guests are even further down the list.

 

[anthony2k7]

1) Heresy !
2) Blasphemy !
3) This is now a corporate culture.
4) The guests/customers are at least fifth or sixth on the list of importance.
. . . #1 is profit
. . . #2 is corporate bonuses
. . . #3 is corporate pay increases
. . . #4 is executives keeping their jobs
5) In thinking about others, maybe guests are even further down the list.

A few years ago this worked - when these things were only obvious to the die hard fans, and being die hard fans, they kept going anyway.

Now the company has given up any pretence that these are their priorities. Its clear to see for even the first time visitors everywhere they look, and its no longer working.

Sooner or later they're going to have to bring back the magic and the quality that people expect from Disney parks. Surely?

 

[Peter Pirate 2]

Maybe the reality of blindly following generally accepted business plans will finally catch up to this company that so many people still expect more from.

I know lots of people defend the business practices because "they're a public traded company and have certain fiduciary responsibilities," blah, blah, blah. This is the greedy tunnel vision that has put our entire country into the financial straights we're in. Acceptance of less because value, quality, service, etc. in order to hit bottom lines. I've always believed the saying "you dance with who brought you" but that's not who Disney's dancing with these days.

Oh yet, let me also say Harry Potter! Nuff said?

 

[skiingfast]

Again, the comments indicate decreasing the discounts/promos. However, with attendance and occupancy relatively flat (even with all the discounts), I don't see how they can do it. It's not like attendance and occupancy are sky-rocketing to where they don't need the promotions anymore.

I think for Disney this was very good news. While many people said Iger announced discounts and then they offered room and dining deals, what they didn't notice is the offers where not as generous. They made the same offer but limited the available dates. Yet this hardly impacted occupancy and attendance.

Also I found the statement about room occupancy strange. I though in DLR it was around 65% for FY 09 and now over 80% which is a big jump. For FY09 I though in WDW it was 79 or 80%, so still a healthy jump. But who knows maybe the comparison that came out was for Q3 of 10 verses Q3 of 09. Reporters tend to miss little details like that when they compare numbers so they can make thier article seem more impressive. Plus I don't have these numbers in front of me and the annual report from 09 is long gone.

 

[lugnut33]

Was just at the World at the end of Oct., and at DL last May and I have to say we had an excellent time at both places. Maybe I don't get it?

I really dislike the idea that they are not investing in the parks, especially when you look at DCA and the FL expansion. They are spending a lot of money and I don't blame them for waiting to start on other projects (in particular DL expansion).

I'm not a big Meg Crofton fan but I think the new Head of Parks at DL is fantastic (George Caligeidas, not sure I'm spelling that right). I also like that John Lassiter is well respected within management.

 

[Peter Pirate 2]

Crofton has brought nothing to the table. The DL guy is obviously more connected. Lassiter, I hope he's respected but I really, really wonder how happy he is. I suspect this is one guy rooting for the rumored Apple takepver.

 

[eliza61]

Most companies very quickly find out that long term discounts rarely work in keeping revenue and Operating cash (profits) going.

I haven't been following the heads of management so I can't say whether they are good or bad.

Problem with discounts is that generally you draw in people who are not going to spend money in the areas where you can make profit. we've all seen the post were folks say the only way they can go if they get the free dining. So excess spending in high markup areas goes.

You can't get rid of free dining because now you've water down the quality and offering of the food that a lot of folks will in no way pay the cash price for it.

Same with entertainment. as other said, closing of interesting entertainment to open up more stores, cutbacks in attractions to the point where it's a hassle to even schedule a visit (Fantasmic, TSM)

I too always have a good time when I visit but more and more it's no longer the premiere spot. It's sliding down