Disney CFO Admits Lower-Income Consumers Are "Stressed & Shaving Time Off At Parks" 

Shares of Walt Disney Co. are lower in premarket trading following mixed third-quarter results on Wednesday. Disney's streaming and movie businesses reported their first-ever profitability—one quarter ahead of schedule. However, a worsening consumer downturn has pressured the entertainment giant's park attendance numbers and per-visitor spending. 

Goldman's Michael Ng provided clients this AM with a breakdown of third-quarter earnings, highlighting streaming and movie businesses kicking into high gear but sliding park demand and "moderation of consumer demand" should weigh on experiences in the coming quarters. 

DIS F3Q24 EPS of $1.39 beat GS/consensus (Visible Alpha) of $1.20/$1.19 as a segment EBIT beat in Entertainment and Sports more than offset a miss in Experiences.

Although DIS increased its F2024 EPS growth outlook to 30% (v. 25% prior) on better-than-expected profitability at Entertainment DTC, ESPN+, and Content Sales/Licensing and Other, Experiences EBIT missed in the quarter and DIS now expects F4Q24E Experiences EBIT to decline MSD% yoy (v. +DD% excluding 1X items prior).

Experiences F3Q24 domestic attendance was flattish and per capita was slightly up. The downgraded outlook in Experiences reflects a moderation of consumer demand toward the end of F3Q24, which should continue to impact the next few quarters, as well as Olympics competition at Disneyland Paris, and some cyclical weakness in China.

That said, DTC EBIT losses beat, and the combined streaming businesses including ESPN+ reached EBIT profitability in F3Q24, a quarter earlier-than-expected. Disney+ Core subscribers of 118.3 mn beat GS/consensus of 118.1/117.4 mn with strength in domestic, and Hulu subs of 51.1 mn beat consensus of 50.7 mn (GSe: 51.2 mn). ARPU was mixed without performance in Hulu ARPU offset by a miss in Disney+ core ARPU.

"DIS could trade lower on the Experiences miss and more cautious forward commentary, which could be partly offset by the better-than-expected momentum in the film studio and DTC," Ng wrote, adding some of the key downside risks include "economic slowdown impacting consumer spending." 

Disney shares have been stagnate for the last decade. 

On Bloomberg TV this AM, CFO Hugh Johnston explained park revenue was actually higher by 2% in the quarter, adding the segment is still growing.

However, Johnston said, "Lower income consumers are a little stressed and shaving a little bit off their time at the parks, and higher income consumers are traveling overseas." 

He noted that the company expects "a few quarters of slight perturbation in numbers," and that "we'll be back as we get to the middle of next year."

The softer results come as Airbnb shares crashed this AM following an earnings report that warned "shorter booking lead times globally and some signs of slowing demand from US guests." 

Also, just last week, travel website Booking Holdings reported worse-than-expected guidance, pointing out a "mild moderation" across the European travel industry and consumers seeking lower-star hotels and shorter stays (mainly in the US). 

To sum up, consumers are cutting back on experiences, whether at theme parks or rental houses at the beach or lake, as the downturn worsens for the working poor and middle class amid the failure of Bidenomics, which has financially crushed tens of millions of households.