Q1 2018 earnings report shows Parks and Resorts revenues increased 13%

The Walt Disney Company yesterday reported quarterly earnings for its first fiscal quarter ended December 30, 2017, showing an increase in both revenue and attendance for its theme park operations.

Diluted earnings per share (EPS) for the quarter increased 88% to $2.91 from $1.55 in the prior-year quarter. Excluding a $1.6 billion one-time net tax benefit associated with new U.S. federal income tax legislation (Tax Act) and certain other items affecting comparability(1), EPS for the quarter increased 22% to $1.89 from $1.55 in the prior-year quarter.

“The strategic investments we’ve made have driven meaningful growth over the long term, and we remain confident in our ability to continue to deliver significant shareholder value,” said Robert A. Iger, Chairman and Chief Executive Officer, The Walt Disney Company. “We’re excited about what lies ahead, with a robust film slate, the launch of our ESPN direct-to-consumer business, new investments in our theme parks, and our pending acquisition of Twenty-First Century Fox.”

Read for the full Q1 2018 report, and see below for the Parks and Resorts segment.

Parks and Resorts revenues for the quarter increased 13% to $5.2 billion and segment operating income increased 21% to $1.3 billion. Operating income growth for the quarter was due to increases at our domestic parks and resorts, cruise line and vacation club businesses as well as at Disneyland Paris. Domestic results benefited from the comparison to the impact of Hurricane Matthew, which occurred in the prior-year quarter.

Higher operating income at our domestic parks and resorts was driven by guest spending growth and an increase in attendance, partially offset by higher costs. Guest spending growth was due to higher average ticket prices, food, beverage and merchandise spending and average daily hotel room rates. The increase in costs was driven by labor and other cost inflation, expenses for new guest offerings and an increase in depreciation associated with new attractions. At our cruise line, growth was primarily due to higher passenger cruise days, which reflected the impact of the Disney Wonder dry-dock in the prior-year quarter. The increase at Disney Vacation Club was driven by sales at Copper Creek Villas & Cabins in the current quarter.

Growth at Disneyland Paris reflected higher attendance and increased average ticket prices, both of which benefited from the 25th Anniversary celebration.

Comments from Christine McCarthy - Senior Executive VP and Chief Financial Officer, The Walt Disney Company

Turning to segment results, Parks and Resorts delivered another strong quarter of financial performance. Operating income increased 21% due to growth at our domestic operations and Disneyland Paris. I’ll note the year-over-year growth reflects the unfavorable impact of Hurricane Mathew and a dry dock at Disney Cruise Line during Q1 last year. At our domestic operations, operating income was up 18% over prior year driven by higher results at domestic parks and resorts and growth at Disney Cruise Line and Disney Vacation Club. Attendance at our domestic parks was up 6% in the quarter, as Pandora - The World of Avatar contributed to record attendance at Disney’s Animal Kingdom and Walt Disney World overall, and Guardians of the Galaxy: Mission BREAKOUT! contributed to higher attendance at Disneyland Resort. Per capita spending was up 7% on higher admissions, food and beverage and merchandise spending. Per room spending at our domestic hotels was up 6% and occupancy was comparable to last year at 91%. So far this quarter, domestic resort reservations are pacing up 3% compared to prior year despite reduced room inventory due to conversions and ongoing room refurbishments. Booked rates are pacing up 13%, which reflects our strategy of improving the guest experience through better load balancing of attendance throughout the year, as well as the benefit of one week of the Easter holiday falling in Q2 this year, whereas the two-week holiday period fell entirely in Q3 last year. 5 We estimate the timing of the Easter holiday period will shift approximately $35 million in operating income from Q3 to Q2. This benefit will be partially offset by the impact of a 14-day dry dock of the Disney Magic , which will adversely affect Disney Cruise Line’s operating income by about $20 million. I’ll also note Disneyland Paris continued to benefit from the resort’s 25 th Anniversary celebration, which drove higher attendance, guest spending, and hotel occupancy. The resort set a new Q1 record in revenue and has now been profitable for the last three quarters, so we are very pleased with the progress we’re making there. Total segment operating income margin was 26.1%, up 170 basis points compared to Q1 last year, and represents the highest quarterly margin for the segment since 2004 when we began consolidating our international parks.