Scott Powers | Sentinel Staff Writer
May 7, 2008
Soaring gas prices and economic woes were no match for pixie dust earlier this year, as gains in attendance and sales at Walt Disney World helped produce banner quarterly earnings for Walt Disney Co.
A strong winter season at Disney World and improved results at other properties in Disney's parks-and-resorts division eased worries among some investment analysts who had wondered whether record oil prices and other weaknesses in the U.S. economy would prompt tourists to pull back.
Disney's answer Tuesday afternoon: a 7 percent year-over-year increase in attendance and a 3 percent increase in per-guest spending at Disney World during the company's fiscal second quarter, which ended March 29. The giant resort's hotel-occupancy rate also was up from the same quarter a year ago. That, along with improved results at Disney's Paris and Hong Kong resorts and continued strength in time-share sales for Disney Vacation Club, helped fuel an 11 percent increase in revenue and a 33 percent increase in operating profit for the parks-and-resorts division.
"I think you pretty much should stop doubting Disney right now, because they seem to know what they are doing," said Rick Munarriz, an analyst at Motley Fool, a Web site that offers investing and personal-finance advice.
Disney reported overall earnings of 58 cents a share for the quarter, compared with 44 cents a share a year ago and topping the 51 cents that most analysts had expected, according to a survey by Thomson Reuters.
The Burbank, Calif.-based company said total revenue -- including the output of its movie studios, TV networks and consumer-products division -- climbed to $8.7 billion in the quarter, up 10 percent from the same period last year, while net profit climbed to $1.1 billion, up almost 22 percent from a year ago.
"We had an outstanding quarter financially and creatively," said Robert Iger, Disney's president and chief executive officer. In explaining the results, he referred to the same factors cited in several previous earnings reports, most notably the company's ability to offer what he called the "Disney Difference . . . our proven ability to create high-quality content across our wide-ranging distribution and promotional platforms, allowing us to leverage our hits and grow our company."
Disney's consumer-products division posted a decline in operating profit, but the other three divisions each posted double-digit percentage increases in their operating incomes. And all four divisions reported increased revenue, led by Disney's studio-entertainment unit.
Still, growing concern about the vulnerability of Disney World and the company's other theme-park resorts to an economic downturn in the months ahead resulted in the parks-and-resorts unit dominating much of the discussion during a Tuesday afternoon conference call presided over by Iger and Thomas Staggs, Disney's senior executive vice president and chief financial officer.
A few analysts have recently been cautioning investors about the possible harm an economic slump could cause Disney's parks. "We believe that Disney's parks-and-resorts segment is one of the most exposed business segments in the company to the impact of a potential recession," Doug Creutz of Cowen and Co. wrote in April.
Iger and Staggs said the theme parks' latest attendance and spending figures were given a boost by the busy Easter holiday season falling during the company's second quarter this year, rather than in the third quarter as it did last year. But even if you excluded the Easter advantage, Disney World attendance still would have been up, Staggs said.
Neither he nor Iger was willing to offer any hard predictions for the future, but both expressed confidence in Disney's strategies for buffering the company from economic downturns. And they said that while theme-park attendance and sales will suffer somewhat in the third quarter when compared with last year's third quarter, preliminary figures from April were promising, and hotel bookings are up slightly.
"I don't have any reason to believe today that that trend will stop," Staggs said. "But we need to get deeper into the summer season to know for sure."
The parks also continue to benefit from the weak U.S. dollar in two ways, Iger said: Domestic tourists can't afford to vacation overseas, so they're choosing trips to Disney World or
Disneyland instead; and tourists from overseas, particularly Europeans, are being drawn to the U.S. by attractive currency-exchange rates that reduce almost everything priced in dollars to bargain levels.
Iger said the addition of moderately priced hotel rooms, the Magical Express airport-bus service and the Magic Your Way multiple-day ticket pricing have helped insulate Disney World.
"We believe we're much better positioned for a difficult economic cycle than we were in the past," Iger said.
Scott Powers can be reached at 407-420-5441 or
spowers@orlandosentinel.com
