The Walt Disney Co. swung to a loss in its second quarter because of restructuring and impairment charges, but its adjusted profit topped expectations and its streaming business turned a profit. Theme parks also continued to do well and the company boosted its outlook for the year.
While Disney said Tuesday that it foresees its overall streaming business softening in the current quarter due to its streaming service in India, Disney+Hotstar, it expects its combined streaming businesses to be profitable in the fourth quarter and to be a meaningful future growth driver for the company, with further improvements in profitability in fiscal 2025.
Disney+ core subscribers climbed by more than 6% in the second quarter.
“Looking at our company as a whole, it’s clear that the turnaround and growth initiatives we set in motion last year have continued to yield positive results,” CEO Bob Iger said in a prepared statement.
It’s the first financial report since shareholders rebuffed efforts by activist investor Nelson Peltz to claim seats on the company board last month, standing firmly behind Iger as he tries to energize the House of Mouse.
Revenue at Disney’s domestic theme parks rose 7%, while its theme parks overseas reported a 29% increase.
But Disney acknowledged wrestling with higher costs at its theme parks during the quarter due to inflation.
The company said that there was increased spending by guests at Walt Disney World due to higher ticket prices, while Disneyland guests boosted their spending due to an increase in ticket prices and hotel room rates.
Overseas, Hong Kong Disneyland benefited from the opening of World of Frozen, a section of the park that includes rides based on the popular “Frozen” movies, in November.
For the period ended March 30, Disney lost $20 million, or a penny per share. That compares with a profit of $1.27 billion, or 69 cents per share, a year ago.
Restructuring and impairment charges surged to $2.05 billion from $152 million in the prior-year period.
Adjusted earnings, which stripped out the charges and other items, were $1.21 per share, easily beating the $1.12 per share that analysts polled by Zacks Investment Research predicted.
Disney said that due to its second-quarter performance, it now has a full-year adjusted earnings per share growth target of 25%. It previously predicted growth of at least 20%.
The Burbank, California, company’s revenue rose to $22.08 billion from $21.82 billion a year earlier but was slightly lower than Wall Street estimates of $22.13 billion.
Shares dropped 6% before the market opened.
In February The Walt Disney Co. said that it was making “significant cost reductions” and reduced its selling, general, and other operations expenses by $500 million in its first quarter. The company cut thousands of jobs in 2023.
In March allies of Gov. Ron DeSantis and Disney reached a settlement agreement in a state court fight over how Walt Disney World is developed in the future following the takeover of the theme park resort’s government by the Florida governor.
Last month character performers at Disneyland in California and the union organizing them, Actors’ Equity Association, said they had filed a petition for union recognition.