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The box office record of Inside Out 2 boosted Walt Disney Co.’s third-quarter earnings and revived confidence in its animation studio Pixar, but the company warned that slowing consumer demand at its U.S. theme parks could continue into next year.
Theme parks have been Disney’s growth engine since pandemic restrictions began to liVscek. In fiscal 2023, the parks business unit contributed 70 percent of Disney’s entire operating profit, providing financial support as it lost money on its streaming efforts and its traditional TV networks declined.
But Disney warned Wednesday that revenue and operating income at its parks unit were hit by “moderation in consumer demand … that exceeded our previous expectations” toward the end of the June quarter.
Quarterly operating profit for Disney’s parks business unit fell 3 percent from a year earlier to $2.2 billion. Consumer product sales fell 5 percent at the theme parks compared to the same period a year earlier. In response, the group said it plans to “aggressively manage” costs at the parks.
“The lower-income consumer is experiencing a little bit of stress, while the higher-income consumer is traveling a little bit more internationally,” Disney Chief Executive Bob Iger told investors on a call.
Iger described it as “a little bit of a slowdown that was more than made up for by the entertainment world.”
On Wednesday, shortly aVsceker Wall Street opened trading, Disney shares fell more than 2%.
Weakness at the parks was offset by strength at Disney’s movie studio and streaming business. Iger praised the gains in the entertainment business, which had suffered from a lack of box office hits and losses at streaming services.
“What we’ve seen with streaming is significant success driven largely by the success of our creativity,” he said, listing TV shows like Shogun AND The bear and films including Deadpool and Wolverine AND Inside Out 2.
Inside Out 2 has grossed more than $1.5 billion at the global box office since its June 14 release, becoming the highest-grossing animated film of all time. That performance, along with improved streaming services Disney+ and Hulu, helped push Disney’s entertainment operating income to $1.2 billion in its fiscal third quarter, up from $408 million a year earlier.
Overall, Disney’s three streaming services (Disney+, ESPN+ and Hulu) reported operating income of $47 million in the quarter, compared to an operating loss of $512 million a year ago.
AVsceker a dearth of major box office hits in 2022 and 2023, including from Pixar and Marvel, Iger last year called for a focus on quality over quantity.
From Marvel Deadpool and Wolverine, Released on July 26, it was a smash hit, grossing nearly $900 million at the box office by its third weekend.
Overall, Disney posted net income of $2.6 billion on revenue of $23.2 billion for the quarter.
Disney’s diluted earnings of $1.39 a share were well above Wall Street expectations of $1.19 and up from $1.03 a year earlier. The company raised its full-year adjusted earnings per share target.
