The Walt Disney Company releases it’s second quarter results today and stock prices are already up over the last few days in expectation. Fortune magazine looks at why this may be.
theme park revenue matters less to Disney than it once did, the company has instituted a number of reforms in recent years that will help it eek out better returns at the resorts this summer. In early April, Lehman Brothers analyst Anthony DiClemente built a strong case for Disney’s theme parks. “We view Disney’s parks as more insulated than in prior recessions,” he wrote in a report to investors entitled “Riding Through Recessionland.” His thesis? First off, a weaker dollar helps international visitation. In recent years, Disney has instituted better cost controls at theme parks to support healthier margins. Disney now has the ability to, for instance, better manipulate park hours, adjust the number of room nights available in hotels, the number of rides and other attractions in operation, and the number of temporary and seasonal workers. Finally, Diclemente points out, Disney’s theme parks segment is more diversified than ever, as it includes Disney Cruise Lines, Disney Vacation Club, and international parks in Tokyo, Paris and Hong Kong.
Disney’s theme parks also account for less than 20% of the company’s revenue these days. So a little hit due to higher gas prices won’t have as big an affect on the bottom line. More later after the official results come in.