Disney parks & products division returns to profit as theme park losses narrow, merchandise sales soar

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Disney said Thursday its parks, experiences and products division posted a profit in the fiscal third quarter — a first since the pandemic began — as losses at its theme parks narrowed and merchandise sales soared.

During an earnings conference call Thursday, CEO Bob Chapek said he’s bullish on the theme park’s future, noting that current reservations are above third-quarter attendance levels. However, recent increases in Covid-19 cases have prompted some group and convention cancellations, he said.

The highly contagious delta variant has caused a resurgence in the virus in recent weeks, particularly in areas with low vaccination rates. On Wednesday, the Centers for Disease Control and Prevention said 90% of U.S. counties are experiencing substantial or high coronavirus transmission.

The disturbing trend has prompted state and local governments to reestablish health and safety measures, and there are fears that consumers could dial back spending at movie theaters and theme parks and that gains from the first half of the year could dissipate.

The resurrection of the theme park industry is critical to Disney’s bottom line. In 2019, the segment, which includes cruises and hotels, accounted for 37% of the company’s $69.6 billion in total revenue. Typically, theme parks account for the majority of this revenue.

In the third quarter, parks, experiences and products accounted for 25.5% of the company’s revenue. In the latest period, Disney earned 80 cents per share, after adjustments on revenue of $17.02 billion.

Disney’s domestic parks eased restrictions in April, which led to a boost in attendance. While guest capacity hasn’t returned to pre-pandemic levels, it improved as mask mandates were loosened during the quarter.

Revenue at Disney’s parks, experiences and products segment jumped 307.6% to $4.3 billion, up from $1.06 billion during the same period last year.

In each of the previous five quarters, Disney has reported a loss in operating income in the segment because of the Covid-19 outbreak. During the third quarter, its operating income reached $356 million, compared with a loss of $1.87 billion during the same quarter last year.

Much of this profitability is attributable to the segment’s consumer products business, which saw operating income reach $564 million, up 290% compared with the same period last year. During the quarter, Disney garnered higher revenue from merchandise based on Mickey and Minnie, Star Wars, Disney princesses and Spider-Man.

Domestic theme parks, resorts and experiences reported positive operating income of $2 million, while international posted a loss of $210 million.

Walt Disney World Resort in Orlando, Florida and Shanghai Disney Resort were open for the entire quarter. Last year, during the same period, Disney World was shuttered entirely and the Shanghai location was only open for 48 days. Hong Kong Disneyland was open for 72 days this quarter, compared to 10 days during the same period last year.

Disneyland in California was open 65 days during the quarter and Disneyland Paris was open for 19 days during the third quarter. Both parks were closed for the entirety of the third quarter last year.



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