Walt Disney Company reported first-quarter sales, earnings and streaming-subscriber growth that handily beat analysts’ forecasts, giving a boost to a chief executive who’s finally out of the shadow of his predecessor.
Bob Chapek has been chief executive of the world’s largest entertainment company for two years this month, but the current period is the first since the departure of longtime Disney leader Bob Iger, who retired as executive chairman in December.
Disney’s earnings increased to $1.06 a share, well ahead of the 57-cent average of analysts’ estimates. Sales in the period ended January 1 increased to $21.8 billion, also topping expectations, the Burbank, California-based entertainment company said on Wednesday.
The company’s namesake parks and the new Disney+ streaming service delivered big upside surprises, providing a one-two punch that cheered investors and lifted the shares as much as 10 per cent in extended trading.
Disney’s parks division generated $2.45bn in operating income, compared with a loss a year earlier. Revenue from the resorts unit doubled from lows during the pandemic, helped by the introduction of new services such as Genie+, a system that allows guests to pay an extra fee to jump in shorter lines for rides.
New subscriptions to Disney+ came in at 11.8 million, far above the 8.17 million that Wall Street had projected, with the total now approaching 130 million. Disney shares tumbled in November after the company announced subscriber numbers that fell short of Wall Street projections. Netflix added to investor worries about streaming growth with a tepid outlook last month.
Shares of Disney jumped on the latest report, rising as high as $162.10 in extended trading. The stock had declined 4.9 per cent this year through Wednesday’s close in New York.
Mr Chapek’s accession to chief executive, coming shortly before the pandemic began to spread across the US “couldn’t have happened at a tougher time,” said Markus Hansen, a money manager with Vontobel Asset Management, which held about 1.77 million Disney shares as of September 30, according to Bloomberg data. Mr Chapek’s experience running the theme parks before his promotion likely helped in the company’s recovery.
“He’s proved his mettle here,” Mr Hansen said.
On a call with investors on Wednesday, Disney chief financial officer Christine McCarthy said new technologies, such as using mobile phones for hotel check-in and food ordering, have reduced costs. Mr Chapek added that a return of live events and international visitors should boost attendance going forward.
Like other media companies, Disney has made a big bet that streaming is the future, as consumers increasingly cancel traditional cable TV to watch films and TV shows online.
Losses at the direct-to-consumer unit widened to $593 million due to increases in programming, marketing and technology costs. Still, the subscriber additions, along with upbeat results from AT&T’s HBO Max business, are likely to ease investor concerns that the streaming business is slowing,
Profit in Disney’s traditional TV units, including ESPN and ABC, fell 13 per cent to $1.5bn, with higher programming costs offsetting increased advertising and fees from cable TV distributors.
Disney’s content sales unit, which includes films, reported a loss of $98m, with theatres still struggling and losses on pictures released outweighing revenue from home entertainment. Films released in the quarter included notable box office disappointments West Side Story and The Last Duel.
The Disney+ streaming service may have got a lift from the recent film “Encanto,” which was released for streaming on Christmas Eve. The animated musical delivered modest results at the box office but has really taken off online.
Encanto was the most-watched film on streaming in the two weeks after its release on Disney+, according to Nielsen. Both the soundtrack album and the song We Don’t Talk About Bruno are No 1 on the Billboard charts. The past quarter also saw streaming releases for The Beatles: Get Back and a new series based on the Star Wars character Boba Fett.
Mr Chapek said Encanto underscores that Disney can still turn films into valuable properties, even with families and older adults shunning movie theatres due to the pandemic.
“We’d love for theatrical to come back for family movies,” Mr Chapek said in an interview on Bloomberg TV. “We hope it does, but if it doesn’t we know that we’re very secure in being able to use our own platform Disney+ to help do that.”
