In this morning's investor Q&A session, Disney CEO Bob Iger and CFO Hugh Johnston discussed key issues surrounding the company's theme parks and experiences, including ongoing cost reduction efforts, attendance levels, and expected demand moderation in the coming quarters.
Cost Reductions and Strategic Investments
Disney has been actively pursuing cost reductions to enhance its bottom line while continuing to invest in its parks and experiences. CFO Hugh Johnston highlighted that Disney initially set a cost reduction target of $5.5 billion, which has since been increased to over $7.5 billion. Johnston emphasized the company's commitment to driving productivity and efficiency, stating, "In big companies, my worldview is there's always an opportunity to do more with less, so we're going to continue to go after it aggressively as we can to both deliver the bottom line and to invest back into business with all the great opportunities we have."
Despite these reductions, Disney says it remains committed to making strategic investments in its parks and experiences. Johnston noted that while the company is mindful of cost, it also recognizes the importance of continuing to invest in areas that will drive future growth, particularly in its theme parks and cruise lines.
Disney's Parks and Experiences Revenue Up in Q3 FY2024, But Operating Income Declines
Attendance and Revenue Outlook
During the Q&A, Iger and Johnston addressed concerns about attendance at Disney parks, acknowledging a slight decline in the third quarter. However, they were quick to note that the decrease was not drastic and attributed some of the softness to broader economic factors. Johnston explained, "We saw attendance [was] flat in the quarter, and perhaps [it was] up a little bit. We expect to see a flattish revenue number in Q4 coming out of the parks."
Looking ahead, Disney anticipates that this trend of flat or slightly declining attendance may continue for the next few quarters, with revenue expected to remain steady. Johnston mentioned that this is not indicative of a prolonged downturn, but rather a temporary moderation in demand that the company is closely monitoring.
Johnston attributed some of the loss in demand to economic pressures on lower-income consumers and an increase in international travel, which may be diverting potential domestic visitors. He said, "Lower-income consumers [are] feeling a little bit of stress, [and] higher-income consumers [are] traveling internationally a bit more."
Speaking later on CNBC, the Disney CFO said, "In reality, people will tend to hang on to their vacations quite strongly because it's an important piece to the family unit. And as a result, we think this is just going to be a few quarters and we'll be fine coming out of it."
The company is also keeping a close eye on potential impacts from the upcoming Olympic Games, particularly at Disneyland Paris, where a temporary reduction in consumer travel is expected due to the event. However, Iger expressed confidence that these challenges are short-term and that the overall outlook for the parks remains positive, especially as new attractions and cruise ships come online in the coming years.
D23: The Ultimate Disney Fan Event will take place August 9-11, 2024, where Disney is expected to announce a number of upcoming attractions and experiences for Walt Disney World and Disneyland.
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