Meanwhile, Disney's operating income from its theme parks division climbed 16.3% from last year to $671 million. This was due to higher guest spending in the U.S. parks and resorts, and record levels of attendance at Walt Disney World, Hong Kong Disneyland and Tokyo Disney Resort. This offset the decrease in attendance at Disneyland Paris.
Revenue from parks and resorts rose 6.1% to $3.60 billion, from $3.40 billion in the same quarter last year. As per the recent quarterly results, the unit represents 30% of the company's revenues and 22% of its operating income.
Yet the theme parks division is not a highly profitable segment by Disney standards. Its margins have been under pressure due to costs associated with the rollout of MyMagic+, as well as an increase in labor costs.
Its profitability, however, has improved from last fiscal year. For the quarter, the unit reported an operating margin of 18.6%, which shows considerable improvement from its 15.8% margin in fiscal year 2013.The parks and resorts segment has also taken the lion's share of Disney's capital expenditure. The company has increased its capital expenditure on the unit by 29% from the same quarter last year, to $539 million in the first quarter of the current fiscal year. The increase was led by higher spending for construction work at Shanghai Disney Resort. Plus, Disney has spent more than a billion dollars on its NextGen initiative to make it easier for its guests to manage their vacations. In Florida, the company has been developing an Avatar-themed area in its Animal Kingdom theme park. The company's investments have been criticized, but they are already making an impact and will likely drive significant growth over the next several years. This became apparent in the previous quarter when the company revealed that MyMagic+ has enabled Disney to serve an additional 3,000 customers daily. Moreover, the ongoing expansion work could also drive significant traffic.
Check Out Our Best Services for Investors
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Model portfolio
- Stocks trading below $10
- Intraday trade alerts