is disney really having problems finacially?

[justskip70003]

please tell me that Disney is not still making billions in profits. everyone keeps talking about cutbacks and Disney's profits. please, they are the strongest company in the world. from what you are going to read, their profits are off 3% here and 7% there. but they are still profiting billions upon billions of dollars. please read and if you are good with financial speak help me with this. it is like reading chinese...

Burbank, Calif.-based Disney said it earned $895 million during the three months that ended Oct. 3, compared with $760 million a year ago. Revenue climbed 4 percent to $9.9 billion.

Operating profit at Walt Disney Parks and Resorts fell 17 percent during the quarter to $344 million, on revenue that slid 4 percent to $2.8 billion. Park attendance improved, but ongoing discounts continued to eat into profit margins.

The results capped a difficult fiscal year in which Disney was squeezed hard by the recession. Disney said it netted $3.3 billion for the year, down 25 percent from last year, on sales of $36.1 billion, down 4 percent.

For the year, parks-and-resorts’ operating profit tumbled 25 percent, dropping from $1.9 billion to $1.4 billion. Sales fell 7 percent to $10.7 billion.

The fourth-quarter results illustrated the challenge Disney faces in predicting a full recovery at its parks, as wary consumers are booking trips ever-closer to when they actually intend to travel.

Attendance at the company’s U.S. theme parks rose 3 percent during the quarter, when the effect of an extra week in Disney’s fiscal calendar was stripped out, as a 3 percent decline at Disney World was more than offset by a 15 percent jump at Disneyland in Anaheim, Calif. The combined result exceeded Disney’s initial prediction that domestic attendance would be flat with a year ago.

But looking forward to the company’s first quarter — essentially October through December — the company said U.S. bookings are still trailing last year’s pace by 5 percent.

“As we saw in the last few quarters, bookings are tending to take place closer to actual travel dates,” said Disney Co. Chief Financial Officer Tom Staggs, who will take over as chairman of the parks-and-resorts division at the end of the year. “It’s difficult to predict how long the downturn will impact consumer spending and travel.”

Disney executives offered no clues about when they will end the discounting that has helped sustain attendance but generated lower returns from the sale of hotel rooms, tickets, food and merchandise. Per-capita guest spending in Disney’s domestic theme parks was down 10 percent during the quarter compared with last year, and per-room spending in its domestic hotels was off 7 percent.

Just after its fourth quarter concluded in early October, Disney decided to bring back a seven-for-four hotel-night discount that covers travel until nearly the end of March, though the promotion is slightly more restrictive than the earlier iteration.

“Booking trends have actually picked up significantly since we announced the discount, and they had been somewhat sluggish before we did,” Iger said, adding that Disney isn’t worried that customers will become accustomed to promotions. “We have not had a problem weaning consumers off discounts in the past.”

The full-year performance of Disney’s parks division was also hampered by the inability of its time-share unit, Disney Vacation Club, to continue bundling new time-share mortgages and selling them off to investors.

Iger warned that the parks will take longer to fully rebound than some of Disney’s other divisions. “If you look back to prior economic downturns, we tend to lag the recovery a bit,” he said. “That has to do with the way vacation.

i see a lot of percentages all over the place but the number that sticks out to me is that the "netted"... in other words profited 3.3 BILLION DOLLARS. Disney is in no way hurting according to me. but then again i make 750.00 a week and am happy with that.

 

[Missytara]

In this day of age of the economy, it is how you weather the storm. It is how you still manage to keep things runnin,g how you manage to pay people and maintain their benefits, keep stock prices up to keep investors happy, etc.

The news is that they are in it for the long haul. While overall profits may be low due to deep discounts, they are able to make profits from their long-term investments - i.e. movies, trademarks, rights to characters, etc.

I am not sure why people feel that someone shouldn't be making a profit in this day and age, especially if they are doing their best to weigh all of their options and do what is best for their company to keep it afloat.

I am getting sort-of the same news from my investment counselor - overall, their margins have slipped somewhat over the past two years, but they have managed to weather the storm, make some sound investments, and they are still managing to keep our accounts up and actually beginning to show an increase. I hit my first big goal in my second retirement account a few months back - it was one and a half years later than I had hoped - but still I hit that big goal.

 

[mariepapa]

Even though their profits were down, they still made money. Not as much as usual but a lot more than I did!

They have to keep shareholders happy so they won't dump the stock.

 

[kmk1180]

Not sure I understand the point of this thread.

Are you saying Disney shouldn't run their business to make money?
Do you really think they should hire tons of staff, and operate like it's prime summer season during a booming economy then take less profits
and tell the stock holders.. gee don't know why we're not doing better?

 

[EastonCat]

Looking at this from a business perspective, those profits are used to do some really important things.
1. They represent the capital (or assets that underwrite getting capital) needed to spend billions on California Adventure and MK Fantasyland transformations
2. A part of the profits will be disbursed to shareholders in various forms. This keeps shareholders holding shares. If shareholders don't hold shares, there are huge problems. Ask anyone that worked for GM about that.
3. Disney has to maintain sufficient cash reserves to maintain their borrowing profile. Profits feed these reserves. If they don't do that, the cost of their credit goes up. If their costs go up, their prices go up and their services go down.
4. By staying healthy and profitable, Disney is harder to acquire. Comcast came after them a few years ago with a hostile bid. If you believe that Disney stays more magical as its own company, as I do, then you want them to have the money to do so.

Don't get me wrong, I think they've cut some corners too deeply and that they've withheld some pixie dust for dollars. But profit is the lifeblood of public companies (And private ones. And, strangely enough, nonprofits). They need to do this to be what we want them to be.

 

[justskip70003]

im not saying they shouldnt make a profit at all. but a lot of people on the board keep saying that disney is making cutbacks and that the strain is being put on the employees. i am just saying that Disney is in fine shape and is making huge profits, HUGE profits. I personally think they need to start charging more so less people can afford to go to the parks. they are way to crowded all the time as it is.

 

[kmk1180]

. I personally think they need to start charging more so less people can afford to go to the parks. they are way to crowded all the time as it is.

wow,
don't really think that's good business.
price out customers so fewer can afford to go, so those that can afford, have less wait times?

 

[Missytara]

im not saying they shouldnt make a profit at all. but a lot of people on the board keep saying that disney is making cutbacks and that the strain is being put on the employees. i am just saying that Disney is in fine shape and is making huge profits, HUGE profits. I personally think they need to start charging more so less people can afford to go to the parks. they are way to crowded all the time as it is.

I think you need to read the above posts once again - it isn't that a few people are putting huge profits in their pockets and then expecting people to pay more and employees to do more with less. Those "profits" are going back into the business to keep it going on the long term.

We all have to make sacrifices when an economy comes along that is as bad as this - the company I work for had to do so as well - but they cannot get along without making a profit to satisfy shareholders and keep investing in their business to keep it going.

You are still missing the entire point about how successful businesses work.....even in hard times.

 

[WDSearcher]

im not saying they shouldnt make a profit at all. but a lot of people on the board keep saying that disney is making cutbacks and that the strain is being put on the employees. i am just saying that Disney is in fine shape and is making huge profits, HUGE profits. I personally think they need to start charging more so less people can afford to go to the parks. they are way to crowded all the time as it is.

You have to remember that Disney is many different things, and all of the divisions operate separately. Just because the Walt Disney Company is making billions, overall, doesn't mean that the theme park division is hugely profitable. And when you read "$3.3 billion", don't forget the next part, which is "down 25% from last year." They're making 25% less this year than last -- that's huge! If you were making 25% less this year than last, what would it do to your budget? And yet, there are probably a lot of people in the world who would look at what you were making and think, "Geez ... he makes way more than I do and he's complaining about 25%?"

 

[mariepapa]

wow,
don't really think that's good business.
price out customers so fewer can afford to go, so those that can afford, have less wait times?

I thought the whole point was to have more people in the parks and more people onsite? That sounds like good business. Making a Disney vacation more affordable to the masses means you get that result.

The idea of having less people in the parks only serves those who feel that Disney is becoming too mainstream a place to visit and not as upscale as I guess it once was.

 

[dmccarty]

Disney had a 9% profit margin. Not very much. Yes 3.3 billion dollars is a lot of money but not when you had to sell 36 billion to earn 3.3. Since their profits are down 25% that is a good billion dollars of missed profit.

That missing profit forces Disney to cut back on expenses such as the events that are not happening at WDW and the missing landscaping and decoration at Food Wine.

Some companies have profit margins around 35-45%. Some divisions in those companies have profit margins over 85%. Even in a bad economy.

If you were investing in a company, do you want your money in the company making 9% or the one making 45%?

Later,
Dan

 

[kmk1180]

I thought the whole point was to have more people in the parks and more people onsite? That sounds like good business. Making a Disney vacation more affordable to the masses means you get that result.

The idea of having less people in the parks only serves those who feel that Disney is becoming too mainstream a place to visit and not as upscale as I guess it once was.

That's right. OP said prices should be higher so fewer people would go.
I kind of think that's wrong.
maybe you misread my post, or i'm miss reading yours?

 

[PSUGuy]

They have to keep shareholders happy so they won't dump the stock.

I'd argue that they'd better make US happy or we'll dump WDW vacations. We've decided to end our 8 day March trips that we took yearly and go for 5 days of F&W in Oct instead. On our March trips we usually had 2 of our 3 adult children and their kids tag along so our party consisted of from 4 adults to 4 adults and 3 kids, they won't be able to join us in Oct due to school. Our kids have talked us into doing an all inclusive in Cancun in March, the closing of the Adventurer's Club and the Comedy Warehouse is what pushed me over the edge. Wifey and I still enjoy WDW and especially F&W, but their cutbacks have caused us to change our Disney habits to Disney's disadvantage.

Bill From PA

 

[PSUGuy]

Disney had a 9% profit margin. Not very much.

Me and my 401K would love to see that figure

Bill From PA

 

[mariepapa]

That's right. OP said prices should be higher so fewer people would go.
I kind of think that's wrong.
maybe you misread my post, or i'm miss reading yours?

I was agreeing with you, not the OP.

 

[Brian_WDW74]

I've moved this thread to the Rumors and News board.

 

[mitros]

Whatever the case here is, the parks, resorts and restaurants are all still jammed. Every time we go, there seems to be more and more bodies on property than ever. Again, whatever the reason for them making less money {supposedly} the place is still jam packed. We are taking a few short trips in January and February, and what a devil of a time I had making reservations {DVC} both at the DVC resorts and at the restaurants. Friends of ours have been going fairly regularly, and they say the parks are always busy, as are the eateries. They also do not understand what the problem is, as there are still a LOT of people going.

 

[Goopy]

The past 2 days I've been able to just walk up to the sci fi diner and crystal palace at normally busy times and walk right in with very little wait. Ride wait times have also been really short, 15 minutes at around noon for space mountain, 5 minutes for haunted mansion as well. There have been a decent amount of people in the park however its far from what I would call busy. Even when I worked the other night at a christmas party the line for the fairy room only reached 30 minutes one time and that was only for a short period of time.

 

[bgohre]

Whatever the case here is, the parks, resorts and restaurants are all still jammed. Every time we go, there seems to be more and more bodies on property than ever. Again, whatever the reason for them making less money {supposedly} the place is still jam packed. We are taking a few short trips in January and February, and what a devil of a time I had making reservations {DVC} both at the DVC resorts and at the restaurants. Friends of ours have been going fairly regularly, and they say the parks are always busy, as are the eateries. They also do not understand what the problem is, as there are still a LOT of people going.

The reason the restaurants are busy is because they are giving away free dining. FREE. Just because there are people in the restaurant doesn't mean they are making money. Think of it this way.

Good economy: You pay $100 for your room p/day. You pay full price for your park ticket, say $200 and spend $40 per person per day on food.

In a bad economy: You pay $100 for your room p/day (maybe less). Pay $200 for your park ticket, but your food is free. Thats $40 p/p that Disney is "losing" everyday by giving away free dining.

I think thats a little oversimplified, but I think you'll get my point.

Also remember, business are designed to make a profit. If they don't make a profit they don't exist. That 3.3 bil they made has to pay shareholders, make improvements to the park and add attractions. If they don't make a profit, then WDW doesn't get Soarin', or EE, or any of the other "new" rides that we always say they need.

 

[mitros]

Oh, you hit the nail right on the head with each of your statements. My only point was that there are TONS of bodies on property, and you showed the reasons. Thank you..........

The reason the restaurants are busy is because they are giving away free dining. FREE. Just because there are people in the restaurant doesn't mean they are making money. Think of it this way.

Good economy: You pay $100 for your room p/day. You pay full price for your park ticket, say $200 and spend $40 per person per day on food.

In a bad economy: You pay $100 for your room p/day (maybe less). Pay $200 for your park ticket, but your food is free. Thats $40 p/p that Disney is "losing" everyday by giving away free dining.

I think thats a little oversimplified, but I think you'll get my point.

Also remember, business are designed to make a profit. If they don't make a profit they don't exist. That 3.3 bil they made has to pay shareholders, make improvements to the park and add attractions. If they don't make a profit, then WDW doesn't get Soarin', or EE, or any of the other "new" rides that we always say they need.