Disney reports largest quarterly earnings in its history
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    Disney reports largest quarterly earnings in its history



    The Walt Disney Co.reported the largest quarterly earnings in its history Tuesday, as the entertainment giant began harvesting profits from new theme-park investments and scored a global box-office hit with the superhero movie "The Avengers."

    Disney said it turned a profit of more than $1.8 billion during its fiscal third quarter, up 24 percent from the same period a year ago. Revenue climbed 4 percent to $11.1 billion for the period, which ended June 30.

    "We had a phenomenal third quarter," Disney President and Chief Executive Officer Bob Iger said during a conference call with analysts.

    Operating profit at Disney's global theme-park division surged 21 percent to $630 million on sales that rose 9 percent to $3.4 billion. That growth was driven by the late March launch of the Disney Fantasy cruise ship; the mid-June opening of a "Cars"-themed attraction in Southern California; and a rebound at Tokyo Disney, which was forced to close for a time last year following a devastating earthquake and tsunami in Japan.

    Company executives were especially upbeat about the early success of "Cars Land," the final piece of a billion-dollar rebuild of Disneyland'sDisney California Adventure theme park.

    Iger said the addition generated record attendance at the two-park resort in Anaheim, Calif., and that the perennially weak California Adventure had become "the perfect neighbor" to the original Disneyland park, drawing nearly 50 percent of the resort's total attendance — up from as little as 25 percent in previous years.

    But while crowds descended on Disneyland, attendance appeared to slip at Disney World during the quarter. Although Disney did not report figures just for its Orlando resort, it said combined U.S. theme-park attendance inched up just 1 percent for the quarter — despite the record growth in California.

    The average occupancy rate also slipped at the company's U.S. hotels — which are heavily concentrated at Disney World — by 1.5 percentage points to 79 percent, though Disney said that was partly due to the addition of inventory with the opening of Disney's Art of Animation Resort in Orlando and Aulani, a standalone hotel and time share in Hawaii.

    Despite the mixed attendance, Disney said visitors on both coasts paid higher ticket prices and bought more food, drinks and souvenirs, sending combined, per-capita park spending up 8 percent for the quarter. Guests also paid higher nightly room rates, pushing per-room hotel spending up 6 percent.

    Disney said room reservations for its fiscal fourth quarter are pacing 1 percent ahead of this time last year, with rates that are up 4 percent since then. Iger said the pace of bookings at Disneyland hotels are "substantially ahead" of Disney World's hotels, though the giant Orlando resort has roughly 10 times as many rooms as its California counterpart.

    "The numbers were see at California Adventure are very impressive," Iger said. "It's all very, very good news and bodes well for the future."

    Disney Co. Chief Financial Officer Jay Rasulo said the company is not concerned that falling currency rates in other countries could make travel to the United States more expensive and deter travel, particularly to Disney World. Although traffic to Disney World from the United Kingdom and Canada declined during the quarter, he said, "that slack was completely picked up by Brazil and Argentina."

    "The growth of interest in Latin America for the Disney franchise, and particularly visitation to Walt Disney World, is probably going to mask any relative currency swings," Rasulo added. "The only thing we're held back by from South America is actually, believe it or not, our visa policy and the ability for people to get access to the market."

    Executives said they also saw impressive early returns aboard the $900 million Disney Fantasy cruise ship, which made its maiden voyage from Port Canaveral on March 31. Disney said the ship became profitable in its first quarter of operation despite multimillion-dollar pre-launch training and marketing costs.

    Disney said the entire Disney Cruise Line fleet, which has grown from two to four ships during the past two years, is now 94 percent booked for the year.

    The April-through-June quarter is typically the strongest of the year for Disney's theme-park division, as schools let out for spring breaks and then for summer vacations. But the unit's 18.3 percent profit margin remains below the 20-plus percent third-quarter margins it routinely reported several years ago.

    Disney blamed higher costs this quarter on labor-cost inflation, costs associated with its resort expansions, and spending on its $1 billion "Next Generation Experience" initiative at Disney World.

    The other big driver of Disney Co.'s record quarterly earnings was the company's movie studio, where operating profit grew more than six-fold, from $49 million to $313 million, thanks to the success of the Marvel superhero movie "The Avengers," which shattered the opening-weekend record for ticket sales and has grossed nearly $1.5 billion worldwide.

    Operating profit at Disney's largest division — its media networks — grew 2 percent during the quarter to $2.1 billion, primarily because of improvements in its Disney Channels' stable of cable-TV networks and the company's broadcast networks. Operating profit leapt 35 percent to $209 million at Disney's consumer-products unit.

    And Disney's smallest business — interactive media — narrowed its losses from $86 million a year ago to $42 million this quarter on improvements in its social-media games.

    Source


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