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The Walt Disney Co. had good reason to expect big things and big returns for the long-awaited sequel to 2009’s “Avatar,” a movie that grossed $2.9 billion and remains the top-grossing movie of all time.

And superstar director James Cameron’s “Avatar. The Way of the Water was nothing short of spectacular in its opening weekend, bringing in $134 million from US theaters and over $434 million worldwide. The problem is that U.S. earnings fell short of analysts’ projections for the film, which predicted “Water Road” to take in $150 million to $175 million in its opening weekend, according to a CNBC report.

That perceived underperformance served to send Disney shares to a 52-week low on Monday and close to their lowest since 2014, continuing a cycle that has played out as the company faces multiple financial challenges. Disney shares have lost more than 40% of their value in the past year.

In addition to falling short of expected U.S. box office sales, “Water Road” also saw disappointing weekend box office sales in China, a country that helped propel the original “Avatar” to its record-breaking gross. China’s current COVID-19 restrictions, including temporarily closing movie theaters, helped dampen grosses there, which reached just over $57 million over the weekend, according to The Wall Street Journal. Only about 35% of China’s movie theaters were open when Water Road opened.

Fears among moviegoers about contracting the virus also weighed on the overwhelming attendance numbers.

“The problem is that no one wants to go to the theater because they’ve been told that COVID is too dangerous,” Tony Chambers, Disney’s global head of theatrical distribution, told the Journal. “Although the cinemas are open, there is really no appetite to go there.”

While Disney shares fell nearly 5% on Monday, the stock was up 1.45% for the day by the close of regular trading on Tuesday.

What is Disney’s financial troubles all about?

According to Walt Disney World’s latest financial reports, Tinkerbell’s wand may not pack the magic punch it once did.

But the return last month of Bob Iger, the longtime Disney chief who had a reputation as a goldmine when it came to generating profits for the company, is boosting investors’ hopes that he can still conjure up a glimmer of success even as the global economy slows. is expected. .

Of course, Disney’s theme parks are very popular and bring a lot of business and profit to the multi-sector Walt Disney Co. % for the same period a year ago.

However, while overall revenues increased, the company’s latest financial reports showed profit margins were well below forecasts. Profit margins at Disney’s domestic parks and experiences business, which also includes cruise ships, fell nearly 16 percentage points to 14.8% from the previous quarter, well below analysts’ expectations of about 20%, according to The Wall Street Journal. %:

The Journal notes that while it’s typical for those margins to decline for the quarter that spans the end of summer and the start of the school year, this year’s decline was more significant than usual and could signal trouble ahead as the slowing economy and decline worry how affect. families spend on leisure and entertainment.

“The omission in the parks was a big surprise,” a senior analyst at Columbia Threadneedle Investments, the asset management unit of Ameriprise Financial and a major Disney shareholder, told The Wall Street Journal.

“The biggest problem is that when they recover and cases reopen, there seems to be a mismatch between revenue and spending,” Goodman said. “For gardens, thinking about next year, even if demand looks strong now, it’s just today and the market is thinking about a possible downturn, there are a lot of unknowns.”

Disney’s park profits fuel higher stakes

Disney has worked to boost park profits by raising base admission fees as well as adding new, paid services such as the Genie+ pass, which allows applicants to skip long lines at popular parks and attractions. But it has also been hit by unexpected problems, such as Hurricane Ian, which temporarily closed Disney World in Florida, costing the company $65 million, according to The Wall Street Journal. Greater investment in marketing and events also led to gains in the latest quarter.

While the park’s profit margins have shrunk and Disney shares are down about 35% year-to-date, the company and its investors are counting on those earnings to offset serious red ink from other projects.

In the third quarter of this year, the fourth quarter of Disney’s fiscal calendar, the company added 12.1 million Disney+ subscribers and 14.6 million total direct consumer customers, beating most analysts’ estimates and blowing away Netflix’s quarterly additions of just 2. 4: million new subscribers per quarter, according to CNBC.

Despite the subscriber growth, net operating losses at Disney’s streaming division, which includes Disney+, Hulu and ESPN+, widened to $1.47 billion in the quarter, per CNBC. That’s more than double the loss from a year ago, which Disney blamed in part on a lack of “premiere access” content, or theatrical releases for which Disney charged an extra $30 to stream, such as “Black Widow” and “Jungle.” Cruise.” »

Disney+ has reportedly racked up nearly $8 billion in losses since its launch.

Disney said in its earnings call a few weeks before Iger was reinstated as the company’s chief executive that it expected losses to ease in the coming quarters, but the announcement did not keep the disappointing earnings report from weighing down Disney shares. even further.


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