The Walt Disney Company released their fourth quarter earnings report on Wednesday, November 10, and the information found inside led to an almost instant 5% decrease of Disney’s stock price. Here’s a breakdown of the investor call:
While certain profit losses would be expected as a result of the world health crisis and supply chain issues that have been plaguing companies everywhere, other aspects of Disney’s profit losses seem to have investors on edge. While the Company did report some gains — for example, the cruise line is back operating at full capacity, investors voiced many concerns about Parks and Resorts and Disney’s Direct-to-Consumer revenue streams.
Walt Disney World
The Q4 earnings call regarding the state of Disney Parks worldwide held a few surprises. Some information was to be expected, like the increased attendance from last year, but there were a couple of things that came as a bit of a shock.
Notably, there were some interesting developments specifically surrounding Walt Disney World. Bob Chapek discussed the immense success of Disney Genie and its counterpart, Disney Genie+. According to him, the rollout of Disney Genie in Florida had “extremely positive responses” from most consumers and reportedly 1/3 of all guests using Disney Genie have upgraded to Disney Genie+. Additionally, Chapek pointed out that, from 2019, the per capita spending at WDW (that is, how much each guest is paying at the parks) has increased 30%. And, according to Chapek and the Walt Disney Company’s CFO Christine McCarthy, that number is only expected to grow. (Does anyone else hear the sound of price increases and further service reductions?)
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In fact, when asked about the impact of inflation on that per capita spending, McCarthy stated that they expected that percentage to grow. In order to do so, she did not rule out a couple of rather controversial changes. She indicated that the Company might change suppliers to keep operating costs down, and she also said they are looking into creating smaller portion sizes. This second point came along with a quip about guests’ “waistlines,” with McCarthy saying their guests might appreciate the smaller offerings. A dismaying comment.
Alongside the inflation costs, McCarthy also pointed to the increased labor costs of running the parks as another reason why their profits have decreased this quarter.
Disneyland
Bob Chapek also had positive things to say about the future of Disneyland. Although it was closed for the entirety of Q4 in 2020, it has seemingly rebounded quite well after reopening. The park introduced a brand-new type of annual pass, Magic Keys, and Chapek said the new passes were “resonating strongly” with legacy AP holders. He also said they sold out of the Dream Key in just two months, a seemingly unexpected occurrence. (Again, comments not based in the reality of the unpopular reaction to how the program works – a potential concern for shareholders expecting truthful statements from the company’s CEO). But aside from the AP “success,” Chapek barely mentioned the California parks, instead choosing to focus more on what Walt Disney World had to offer.
However, he did confirm that the Company was still planning on bringing Disney Genie to Anaheim.
Disney Plus
Aside from the information given about the Parks and Resorts, Bob Chapek focused strongly on the performance and future of Disney Plus, which investors say has been the main cause of Disney’s stock price tumbling. Although it had a strong initial start, surpassing 100 million subscribers in just 16 months (a number that took Netflix 10 years to reach), that subscriber growth understandably slowed down considerably, as new subscribers are going to be harder to reach.
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Chapek and Christine McCarthy also blamed the deficit cost of Disney Plus on the increased number of shows they had in production to make up for the time not spent filming during the pandemic (though most of Disney’s competitors continued filming during the pandemic). They also mentioned the cost of “talent” as being higher than they anticipated. Overall, Chapek said he didn’t expect Disney Plus to be profitable until fiscal year 2024, a timeline that apparently didn’t sit well with some investors.
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Let’s Hear From You
How do you feel about the Q4 earnings call? Was it as you expected or were there some surprises? What do you think the future looks like for the Walt Disney Company, particularly Parks and Resorts? Are you happy with Bob Chapek’s performance and with the insistence on bringing Disney Genie to Disneyland? Let us know!
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