Thursday, November 9, 2023

Disney Fourth Quarter Earnings Call Notes - Slow Playing Parks Investment

 


Disney had their fourth quarter (and therefore entire year) earnings call yesterday.  As always, a lot of what is talked about there is dense and numbers heavy, so I don't want to go into too much detail as it relates to the company as a whole.  This blog is focused on Walt Disney World, so I wanted to talk about a couple of things that came up related to the parks, as well as Disney reiterating yet again their plan to "turbocharge" investments into the parks.


In the "Experiences" segment (which is really Parks, Resorts and Experiences - I think the name keeps changing but it means large the same thing), operating income was up year over year.  This is good news!  The parks continue to be Disney's most successful sector, and Bob Iger once again commented on CNBC that the parks are "a great place to place our bets."



A closer look at these numbers reveals something interesting, though not surprising if you've been paying attention.  This segment of the company is being propped up by things that are NOT Walt Disney World - namely Disneyland, Disney Cruise Line, Disney Vacation Club and the international parks.  Disney has tried to explain this away as a return to normal levels after demand was high following pandemic restrictions, as well as a "coming down" from the 50th Anniversary celebration (that one always seemed like a reach, given how little "celebrating" actually was done).


No matter how you slice it, though, income was down at Disney World year over year.  This isn't necessarily a cause for alarm - in fact, the great success of the other parks and experiences mean that this segment is still strong for the company as a whole.  But there's no hiding or denying that things have slowed down at Disney World, hence all of the discounts and enticements Disney has been dropping to try to increase attendance for next year.


I don't want to turn this into an "I told you so" piece, so I'm going to refrain from elaborating too much here.  But effectively, this was the result of the company's short term thinking, trying to capitalize on the travel boom post Covid and assuming that attendance would stay high regardless of what they took away from the guests (or charged more for).  It's GOOD that this is turning around - consumers vote with their wallets, and it has led to some changes since Iger's return, with more on the horizon.  In other words, the market is correcting itself.

 

This leads into the other important piece about the parks on this earnings call.  Disney once again talked about all of the investments coming to the parks over the next decade.  Words like "turbo charged" and "very bright" were used to talk about the future of the parks.  This is all stuff we've talked about here repeatedly, most notably in this post.   As we've said before, this earnings call is for investors first and foremost, meaning Disney has a mandate to tell the truth about their future investments.  This $17 billion that Bob Iger has mentioned IS indeed happening.  



The interesting (but again, not surprising) part came from interim CFO Kevin Lansberry.  He pragmatically stated that the large parks investment would be more heavily weighted to the back half of these ten years, with "more gradual increases" in the coming years.  This lines up with what I wrote in that prior linked post - Disney has to solve some of their other company issues before they can devote these resources to the parks.


How you feel about announcements like these probably depends on your mood.  If you're being positive, it's great to hear that the parks are getting a major investment.  In ten years, we can look back at this point and think, "Wow, look at how much has changed!"  Disney continuing to be "bullish" (in Iger's words) on the parks is always welcome, especially as the focus of the company has been more on streaming in recent years.


But if you're in a negative place, you might be thinking ... come on already!  Disney has been talking about these investments for months now, with no appreciable movement at the parks.  It's all well and good to paint a rosy picture of the future, but that's not bringing people in over the next couple of years.  The change to Animal Kingdom's Dinoland, for example, is sorely needed, but now work likely won't even BEGIN there until late next year or even 2025.  


As I said in that previous post, Disney does a good job of spinning smaller projects to make them sound appealing in the short term.  And I'm on board with that!  But eventually something substantive will have to be made official.  Until then, I'll just nod my head and wait (patiently?) for something to happen.  The company seems to be doing their best impression of Flash from Zootopia here but at some point, they have to pay off all of these promises. 


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