Disney (DIS) laid out key levers it can pull to help battle a potential recession — as the media giant’s theme parks business showed signs of weakness in the fourth quarter.
On the earnings call following the disappointing results, Disney CFO Christine McCarthy noted that the company has tools, both new and old, that it can utilize to keep its parks business afloat should consumers pull back spending.
According to the executive, one tool includes discounting — something that McCarthy noted the media giant used in the past as an “effective lever for managing yield.” Still, she said that the company won’t use discounting to the extent that it did during the last recession in 2009.
Newer advancements include an updated reservation system that manages and tracks attendance, thus allowing the company greater flexibility when it comes to making adjustments in real time.
She added that a seasonal tiered pricing structure, coupled with a reimagined annual pass business model, plus technological advancements on the expense side (mobile ordering, contactless check-in), adds to that flexibility.
McCarthy noted that Disney permanently removed a significant amount of operating expense at the parks during the pandemic, telling investors that the move “better positions us right now as we go into uncertain economic environments.”
The company maintained that it will actively evaluate costs moving forward and will look for efficiencies to better streamline its operations.
Park operations miss expectations amid recession fears
Disney’s theme parks, which saw quick COVID bounce backs amid increased attractions, price hikes, and updated technologies like the Genie+ app, missed expectations in the quarter as recession fears pressured consumer demand.
Revenue from the company’s parks, experiences, and consumer products division came in at $7.43 billion (vs. estimates of $7.59 billion), with operating income hitting $1.51 billion (vs. estimates of $1.9 billion.) Shanghai’s Disney Resort remains closed amid strict COVID-19 protocols. The company revealed it has “no visibility on reopening date” for the Shanghai location.
Despite the miss, McCarthy said the media giant anticipates a “strong” holiday season at the parks in the first quarter of 2023.
Alexandra is a Senior Entertainment and Media Reporter at Yahoo Finance. Follow her on Twitter @alliecanal8193 and email her at alexandra.canal@yahoofinance.com
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