Visitors to the so-called "Happiest Place on Earth" often find themselves in a scary scenario once their vacation ends.
What Happened: About 24% of Disney-goers have gone into debt to finance their trip.
According to a LendingTree survey, this figure rises to 39% among members of Gen Z and 45% among parents with children under 18. Parents of young children took on an average of $1,983 in Disney-related debt.
Still, theme parks remain Walt Disney Co's (NYSE:DIS) most profitable business segment.
The Burbank-based company, which struggled to turn a profit with streaming, saw revenues of $8.4 billion at an operating margin of 27% in the second quarter of 2024 — that's just its "experiences" (i.e., theme parks, hospitality, cruises) segment alone.
Experiences made up more than 37% of Disney's revenue and 59% of operating profit — higher than it was a year ago.
Why It Matters: Investors will pay close attention to several metrics ahead of Disney's Aug. 7 third-quarter earnings.
The theme park segment remains a bright spot, considering admission prices have steadily ticked up. According to a study from AllEars, adult ticket prices have increased over 90% in the past decade.
A Disney World debtor told the Tampa Bay Times that the "once in a lifetime trip" was "worth it" even though it sent her thousands of dollars into debt..
Total park attendance increased 6% year-over-year in 2024's first quarter and guests spent 6% more at the parks (per capita). Analysts noted that 2024 Q1 theme park results were very strong.
Disney's Other Woes: Despite theme park success, Disney shares are trading more than 50% lower than its all-time high in 2021. Its share price is also down over 10% in the past two years.
Disney — which owns streaming services Disney+, ESPN+ and Hulu — has struggled in the streaming services with immense competition from the likes of Netflix, Amazon Prime Video, Max and Paramount. Disney+ and Hulu have had slow subscriber growth while Disney's movie studio repeatedly bleeds money (although it did have a hit this year with Inside Out 2.)
Indeed, investors will look for updates on subscriber numbers for Disney+, ESPN+, and Hulu. This will also likely be compared to growth rates from competitors like Netflix and Amazon Prime Video. Additionally, investors will hope for margin expansion on this end.
Close attention will be paid to any management commentary that could signify a change in strategy in the streaming segment.
In 2023, Disney's entertainment division represented 45% of company revenue but only 11% of operating income. Disney's direct-to-consumer streaming services made just $47 million in operating profit in 2024's second quarter (better, though, than its $587 million loss a year prior and analyst estimates of a $100 million loss.)
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