Disney’s Parks Struggle, Exposing a New Trouble Spot

07.08.2024 - 12:45 / nytimes.com / Josh Damaro

In Disney’s seemingly never-ending game of corporate Whac-a-Mole, a new trouble spot has arisen: Americans — battered by years of high inflation — have less money to spend on amusement, imperiling growth at Disney theme parks.

On Wednesday, Disney reported weaker-than-expected theme park results for the three months that ended on June 29. Revenue increased 2 percent from a year earlier, to $8.4 billion, while operating profit declined 3 percent, to $2.2 billion. Disney blamed a “moderation of consumer demand” that “exceeded our previous expectations,” along with higher costs. Disney said softening demand “could impact the next few quarters.”

Disney added that it was “aggressively managing our cost base.”

Theme parks have taken on much greater financial importance at Disney over the past decade. They have been the A.T.M.s that have paid for Disney’s costly expansion into streaming and picked up the slack for the company’s atrophying cable television business. Last year, Disney Experiences, a division that includes theme parks and cruise ships, contributed 70 percent of the Walt Disney Company’s operating profit, up from about 30 percent a decade ago.

Robert A. Iger, Disney’s chief executive, has called theme parks and cruise ships “a key growth engine” for the company. Last year, Disney said it would spend roughly $60 billion over the next decade to expand its parks and to continue building Disney Cruise Line, double the amount of the previous decade. Josh D’Amaro, chairman of Disney Experiences, is expected to unveil an array of specific expansion projects on Saturday at a fan convention in Anaheim, Calif.

But there are reasons to worry that the U.S. economy could be headed toward a recession. In addition, the global postpandemic surge in travel is largely over. Citing a “normalization” of demand, Comcast said last month that quarterly revenue at its Universal theme parks had fallen 11 percent, while pretax earnings plunged 24 percent.

Mr. Iger has been trying to move Disney beyond a tumultuous period when activist investors sought to alter the company’s direction. One activist, Nelson Peltz, mounted a proxy contest for board seats this year and harshly criticized Disney’s streaming strategy, succession planning and lagging stock price. Disney fended off the attacks, but its share price has fallen 27 percent since early April.