‘Frozen,’ ‘Thor’ Sequel Heat Up Disney First Quarter Results
The success of the animated musical “Frozen” and Marvel’s “Thor: The Dark World” helped boost the Walt Disney Co’s first fiscal quarter results for 2014, with gaining 9% to $12.3 billion, while profits came in at $1.8 billion, an increase of 27%.
Disney’s first quarter wrapped Dec. 28, 2013, capping a strong holiday period for the company. Its fiscal year typically ends in September.
“We had an incredibly strong first quarter, delivering a 32% increase in adjusted earnings per share and double-digit increases in operating income in all business segments,” said Robert Iger, chairman and CEO, the Walt Disney Co. “These results reflect the strength of our unprecedented portfolio of brands, a constant focus on creativity and innovation, and the continued success of our long-term strategy.”
In fact, Iger was almost giddy during a call with investors to discuss the results after Wall Street ended trading on Wednesday.
He was especially high on the studio division and the potential hits that will come from its core Disney, Marvel, Pixar and now Lucasfilm brands.
“In today’s global marketplace big franchise films play extremely well,” he said, noting that half of the world’s top 20 grossing films were produced by Pixar, Marvel, Disney or Lucasfilm.
“I sound like a huge cheerleader for the Disney brands,” Iger said during the call, thrilled by the quarterly results.
“Our ability to leverage the success of these characters and franchises across the company and the world is signicant and will only grow in significance,” Iger said, adding that the Mouse House isn’t looking to add to its portfolio with new acquisitions “right now.” The brands it already has “have growth potential by creating new franchises,” he said.
Disney said its film division saw a 23% increase in revenue, earning $1.9 billion primarily from the success of “Frozen” and the “Thor” sequel. The hits helped boost profits by 75% to $409 million.
“Frozen,” which Iger said has passed “The Lion King” as Walt Disney Animation Studios’ biggest hit, has earned $865 million worldwide to date, while “Thor: The Dark World” is at $633 million.
International prospects for “Frozen” continue to be strong with the toon having earned $45 million in Korea, the most for a Disney animated film there. It also opened in China this week and bows in Japan on March 15.
Declines in the home video market also leveled off during the quarter, but it should be noted the holidays often drive purchases of films as consumers look to movies as items to give as gifts.
Still, Iger said it also helps that Disney is “making movies that stand a better chance at doing well in secondary markets,” like traditional and digital home video platforms.
Disney’s media networks, its biggest moneymaker, saw revenue rise 4% to $5.3 billion, while profits increased 20% to nearly $1.5 billion.
Revenue rose 6% to nearly $3.8 billion at the cable division, which includes ESPN, Disney Channel and A&E. Profits were up 34% to nearly $1.3 billion. Sales at ABC dipped 2% to $1.5 billion, lowering profits by 32% to $178 million.
Iger said Disney would broker a new deal with Dish to air its channels.
Sales at its theme parks and resorts rose 6% to nearly $3.6 billion, while profits rose 16% to $671 million, as guests spent more at its domestic parks and resorts during the Thanksgiving and Christmas holidays. Disney continues to roll out MyMagic+ at Walt Disney World and saw profits effected partially by investment in the new band that holds a guest’s theme park ticket, hotel room key, Fast Passes and credit card information.
Investments at the parks “continue to pay off” for Disney, said chief operating officer Jay Rasulo.
That includes the expansion of the Magic Kingdom’s Fantasyland and Disneyland’s “Cars Land,” but also the roll out of the MyMagic+ bands.
The parks were able to accommodate 3,000 more guests in the Magic Kingdom per day because of MyMagic+, Iger said during the investor call, stressing the significance of the time period — its busiest of the year — and location, its most popular theme park.
The addition of more guests in the park will clearly have an impact on the bottom line of the company in the future, Iger said, without giving any details.
The consumer products arm also enjoyed an 11% gain in revenue, earning nearly $1.9 billion. Profits were up 24% to $430 million. Disney said the higher sales were the result of the inclusion of Lucasfilm into its product portfolio and higher revenues from the performance of “Planes,” Disney Junior and “Monsters University” merchandise. Sales of “Cars” and Spider-Man products came in lower than usual.
Disney Stores enjoyed sales gains for an eighth-consecutive quarter, the Mouse House said, the retail outlet scoring best when it highlighted popular properties, Rasulo said. Merchandise for “Frozen” were the single most in demand items at Disney Stores, followed by products for Disney Junior TV shows like “Doc McStuffins” and “Sofia the First.”
And Disney Interactive, which recently released the hit “Disney Infinity” game, saw sales rise 38% to $403 million, while profits were up to $55 million, compared with $9 million a year ago.
Iger said sales of “Disney Infinity” proved the strength of the platform and how Disney characters and its franchises can work in the game. New installments of the game will further mine a broader set of its more popular characters, Iger said.
While layoffs were not mentioned during the earnings call, Disney Interactive is still expected to be hit by a round of cost cutting soon that could result in several hundred staffers losing their jobs.
Disney Interactive will also focus more on brokering licensing deals for games and produce titles for mobile platform, “where our consumers are,” Iger said.
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