Disney’s Results Surpass Expectations on ESPN, Theme Park Strength

Disney’s profit margin actually dwindled this quarter over last year. But it’s okay because they surpassed Wall Street Expectations. Which goes to show that managing expectations is one of the more important jobs the CEO of a public company can perform.

Looks like The Disney Channel properties and ESPN were strong. Theme parks weren’t as weak as everyone feared. CNN Money has the analysis:

Revenue from the company’s theme parks and resort operations grew
11% and operating profits grew 25%, defying expectations that Disney
would take a hit in this segment due to the slower economy.

reported that domestic customer spending actually increased due to
higher ticket prices, and greater food and merchandise sales. A weaker
dollar also contributed to international attendance at domestic parks,
Iger said in a conference call with analysts.

Disney does a good
job of keeping costs down, said analyst Doug Creutz of Cowen &
Company, but its theme parks could take a hit later on in the year, due
to the economic downturn.

That second paragraph worries me. Disney has been pushing Ticket Prices higher and higher for a number of years now. I don’t know how much longer that trend can continue without affecting other revenue streams (such as food and merchandise). Greater food and merchandise sales were accomplished largely through raising prices and simplifying choices. Both of those strategies will raise profits in the short term, but I worry that over the long term they’ll provide a less enjoyable experience for the guest and result in fewer repeat visits, and lost sales. The weaker dollar has been a savior bringing more international spending, but there are signs that the dollar will regain some of its strength in the recession.

It seems likely that Disney will experience some sluggishness in theme parks (although some factors could counter-balance that), advertising sales (in part due to the writer’s strike), and the movie business (but that only because that industry is still sorting itself out). I’m not saying to sell your Disney stock, but I do think there will be buying opportunities ahead. (Read)