Reports of empty parks and angry fans have more than just social media users running scared. Wall Street is too. I don’t think I need to tell you that when you’re a massive publicly traded corporation, you never want Wall Street to worry that you’re failing. Yet, here we are. Many analysts have expressed concern that Disney may not be “too big to fail” after all. Is there any truth to it?
Wall Street, you see, doesn’t care about our feelings. They don’t care about nostalgia. They don’t care that Disney is our “happy place.” They care about just one thing: profit. Disney has already admitted that they expect to see less profit in the last half of the year. They attribute it to fewer visitors now that Walt Disney World’s 50th-anniversary celebration has come to an end.
Former Walt Disney Company CFO Christine McCarthy said, “This comparison, coupled with inflationary cost pressures, including from a new union agreement, is expected to drive a modest adverse impact to domestic parks and experienced operating margins in the third quarter compared to the prior year.” McCarthy did not survive at the company long enough to see her prediction become a reality, but it certainly has.
These fears have led stocks to fall dramatically. Yahoo Finance says, “The stock is down about 8% on a year-over-year basis and has sunk roughly 12% over the past three months.” That’s a problem. Why the downturn? In short, investors are scared. Disney’s theme parks account for much of its revenue, so if the Parks are struggling, the company is struggling. No one wants to invest in a sinking ship, so many stockholders are heading to the lifeboats.
McCarthy’s exit isn’t the only act of desperation Disney has made recently. CEO Bob Iger returned in November with what was supposed to be a two-year contract. His primary objective was said to be to find and prep a replacement. We predicted several months ago that he wouldn’t be going anywhere, and we were right. Today The Walt Disney Company announced that Mr. Iger’s contract, which was supposed to end in November 2024, had been extended until 2026.
The Parks have also made several changes in their operations in the hopes of enticing people back (no, it’s not because they care). Beginning next year, the Disney Dining Plan, which allows guests to pre-pay for their meals (and often, but not always, save money) will return, and park reservations will end. Disney hopes that this will encourage more people to visit the parks during a 2024 that is already looking soft.
Are Disney Parks dying? We don’t think so. We believe they are changing, though, and Wall Street hates change. Profits continue to be high; they just aren’t as high as they were during the pent-up demand from COVID. It’s a certainty that many have sworn off Disney due to politics, there’s no denying that, and it is highly likely enough to have done so that it is affecting the bottom line but it’s not enough to hurt the bottom line. There is a difference. In truth, the Parks are adapting to a “new normal.” There are growing pains but they will adapt, and Wall Street will adapt with it.
