Resorts help drive earnings for Disney

A strong performance from Walt Disney World and other Disney theme parks helped the company reach another profitable quarter last winter.

The company reported Tuesday that while total sales were up just 1 percent to $8.07 billion, profit reached $931 million for the second quarter of the 2007 fiscal year, 27 percent better than profits posted in the same three months in 2006.

With that, Disney offered diluted earnings of 44 cents per share to investors. The offer beat consensus market expectations of around 36 cents, and the 37 cents per share that Disney offered following its second quarter of 2006.

"We've had another excellent quarter, posting double-digit increases in net income and earnings per share," said Disney President and Chief Executive Officer Robert Iger. "These results are evidence of our ability to nurture great creativity, our strength in operating a broad range of businesses, and our commitment to financial discipline. . . . They validate our strategic vision."

Disney's stock closed Thursday at $36.55 per share, up 49 cents.

Analysts were pleased with the report.

"I don't think they had anything to complain about. All the divisions showed nice profits," said media analyst Harold Vogel of Vogel Capital Management.

Internationally marketed Disney channels, strong syndication of ABC-TV shows, hot Cars toys and Disney-published game sales and hit, relatively inexpensive movies such as Wild Hogs and Bridge to Terabithia helped all the company's operating units post quarterly profits.

Disney's parks and resorts division, which includes theme parks, hotels, the Disney Vacation Club time-share program and the Disney Cruise Line, saw sales grow 9 percent to $2.4 billion in the quarter, which ended March 31.

That success was boosted by increased attendance and higher per-customer spending, which was driven by higher average ticket prices and average daily room rates, according to the report. As a result, the parks and resorts division posted an operating profit of $254 million, up 19 percent from the same period last year.

Those increases partially offset the higher operating costs seen at some parks including Walt Disney World — due to labor cost inflation, new attractions, increased marketing and volume-related costs, the company reported. Most of Disney's other parks also did well.

But Disney Chief Financial Officer Tom Staggs said Hong Kong Disneyland, which opened in the fall of 2005, continues to fall short of expectations and Disney is planning new marketing campaigns.

"We're confident in and committed to this project," he said. "We're likely to continue to invest in this park."

Disney World, by contrast, saw attendance increase 7 percent over the same quarter in 2006. Per-customer spending was up 3 percent. Disney World hotel occupancy was up slightly to 88 percent, and per-room spending also was up slightly, Staggs said. The average customer's length of stay at Disney World also continued to increase, he said.

Iger said Disney World saw strong attendance across the board in the quarter — including international visitors, though they still are not flocking to Orlando at pre-2001 rates. He said Disney now is running a much more coordinated international theme park marketing program, and at the same time running a distinct Disney World program in Europe.

"We're particularly gratified at how well our Disney parks and resorts are performing," Iger said. "Walt Disney World just set a new 15-day Easter period attendance record. Overall bookings remain strong even in comparison with the record numbers drawn by the 50th anniversary of Disneyland, showing that our 'Year of a Million Dreams' campaign is having tremendous impact."

The things that surprised analysts most seemed to be the broadcast advertising revenue increases and the theme parks' solid performance in the face of continued high gas prices, nervous British visitors and higher ticket, hotel and labor prices.

"More times than not they have surprised investors by being able to pass [ticket price increases] through without hiccups from the customers," said Robin Diedrich, media analyst for Edward Jones. "The ticket to a Disney park still seems to be a highly valued option. That just bodes well overall. And they continue to add features and new attractions."

The entertainment giant's profit rose 27% to $931 million as all of its business segments turned in a strong second quarter.

Scott Powers can be reached at or 407-420-5441.

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