Disney lays out key 'leverage' to combat recession impact as theme parks weaken

Disney (DIS) laid out key levers it could use to help fight a potential recession — as the media giant’s theme park business showed signs of weakness in the fourth quarter.

On the following earnings call the disappointing results, Disney CFO Christine McCarthy noted that the company has tools, both new and old, that it can use to sustain its parks business if consumers withdraw spending.

One tool, according to the executive, includes a discount, something McCarthy noted the media giant has used in the past as “an effective lever to manage yield.” Still, she said the company won’t use discounting to the extent it did during the last recession in 2009.

Christine McCarthy, senior executive vice president and chief financial officer, The Walt Disney Company, smiles as she speaks during the Milken Institute's 22nd Annual Global Conference in Beverly Hills, California, U.S., April 29, 2019. REUTERS/Mike Blake

Christine McCarthy, senior executive vice president and chief financial officer, The Walt Disney Company, smiles as she speaks during the Milken Institute’s 22nd Annual Global Conference in Beverly Hills, California, U.S., April 29, 2019. REUTERS/Mike Blake

More recent improvements include an updated booking system that manages and tracks attendance, thus allowing the company more flexibility when it comes to making real-time adjustments.

She added that a seasonally differentiated pricing structure, combined with a reimagined business model for annual passes, plus technological advances on the cost side (mobile ordering, contactless check-out) add to that flexibility.

McCarthy noted that Disney permanently eliminated a significant amount of operating expenses at the parks during the pandemic, telling investors that the move “better positions us as we enter an uncertain economic environment.”

The company maintains that it will actively evaluate costs going forward and seek efficiencies to better streamline its operations.

Park operations have fallen short of expectations amid recession fears

Disney theme parks that saw a rapid recovery from COVID amid increased attractions, price jumps and updated technology such as Genie+ appmissed expectations in the quarter as recession fears put pressure on consumer demand.

Revenue from the company’s Parks, Experiences and Consumer Products division came in at $7.43 billion (vs. estimates of $7.59 billion), with operating income coming in at $1.51 billion (vs. estimates of $1.9 billion). Shanghai Disney Resort remains closed amid strict COVID-19 protocols. The company revealed that there is no “reopening date visibility” for the Shanghai location.

Despite the omission, McCarthy said the media giant expects a “strong” holiday season at the parks in the first quarter of 2023.

Alexandra is a senior entertainment and media reporter at Yahoo Finance. Follow her on Twitter @alliecanal8193 and email her at [email protected]

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