For those of you who would prefer to listen:
As goes Disney, so goes the country. That’s an old adage that still has some merit today. Walt’s 103-year-old company represents so much of America, at its parks, in theaters and throughout society from coast to coast. Disney couldn’t hide from the depths of Covid nor avoid divisive politics. But the company keeps reinventing itself, as it has since the beginning. Starting with animated shorts at the movies, then moving on to feature films, television, VCR’s, DVD’s, and now streaming, the Walt Disney Company has transcended time. It has weathered world wars, global pandemics, disruptive innovations and leadership successions. It all started with a mouse. After another tough stretch, the Mouse House is making another comeback.
The Walt Disney Company reported another record quarter for its parks division. It wasn’t just price increases. U.S. traffic increased 3% from last year. This, despite a continued slowdown in international travel to the U.S. Historically, over 20% of Disney World traffic is from international visitors. Not so this year. Visitation picked up domestically as Disney’s Experience business line, which includes theme parks and cruise lines, grew revenue 10% compared to a year ago. It was an all-time record of $10 Billion for a quarter. In fact, that was the 6th consecutive record quarter for Disney Experiences. That was even more impressive considering Universal Studios, owned by Comcast, reported a lag in traffic in Orlando. Travel is still a popular theme in America. It’s also clear that Americans are more selective in where they go to spend their hard-earned money.
Travel has been strong around the globe, despite inflationary pressures and military activity. It’s been a theme ever since Covid. Tourism grew worldwide last year. However, the United States was the only major destination to see a drop in foreign visitors. This, according to the World Travel & Tourism Council. Overall, international travel to the U.S. fell 6%. The tariff campaign announced last year seemingly soured the mood for many foreign visitors. It’s particularly pronounced with our neighbors up north. Canadian travel to the United States has seen a historic downturn with a full quarter drop. Over 7 Million fewer Canadians came to the United States, opting for Europe and Mexico, among other locations. Hotels and restaurant operators in American tourist towns have certainly felt the pinch.
Myrtle Beach recorded the steepest drop in Canadian travel. The South Carolina beach town saw a 65% decline. Florida saw its Canadian tourism business get cut in half. Las Vegas felt a 17% contraction from Canadian visitors. Arizona felt it too. Local businesses throughout the state said they noticed a sharp decline from the annual “snowbird” migration over the Winter. Snowbirds historically generate roughly $1.5 Billion in revenue for the Grand Canyon State.
Things were shinier in the Golden State. Disneyland saw a nice bump in local traffic as the company ran discounted promotions for California residents. Would you believe that the vast majority of daily Disneyland traffic, as high as 70%, comes from Californians? International visitors account for less than 10%. Contrast that with Disney World, where two-thirds of daily visitors come from out of state and up to 20% are international.
Disney’s experiences segment also benefited from the addition of 2 new ships to its cruise fleet. They’re named the Disney Destiny and the Disney Adventure. Together, these cruise liners increased capacity by roughly 50%. That helped push revenue from the resorts and vacations piece of the division up 17% to $2.8 Billion for the quarter.
Airbnb also reiterated the strong travel demand in its earnings release. Its North American business grew at a solid single-digit rate compared to a year ago. But the greatest strength came from overseas. Bookings in Asia grew in the high teens while Latin America jumped 20%. Mexico and Brazil were the highlights there, and the company expects it to continue for the rest of the year. The World Cup was an obvious growth agent for the company during the quarter. It will certainly provide for a tough comparison next year. And here’s another takeaway from the company: Airbnb’s AI agent is resolving 45% of the issues brought to it by customers without requiring a human agent.
Another important Summer theme: Americans went back to the movies. Toy Story 5 kickstarted the theme generating over $1 Billion at the Box Office. It achieved that in its first 5 weeks, marking just the 6th time a Pixar film reached the $1 Billion milestone. Toy Story 5 brought in $160 Million on its opening weekend in the U.S. alone. The Pixar classic sequel was one of the most successful animated releases in history. The film also increased Consumer Products revenue for the company. A surge in Toy Story merchandise triggered the strongest growth for Consumer Products in 5 years.
The movie theme accelerated over the Summer as Spider-Man: Brand New Day cleared the $1 Billion mark in just a week. It’s expected to clear $2 Billion later this year. Only 7 other films have accomplished that. Among them were Avatar, Avengers, Star Wars and Titanic. The Spider Man film was the top opener ever for AMC theaters. It also owns the all-time opening records in more than a dozen countries including France, Belgium, India, Brazil, Spain, Peru, Saudi Arabia, Turkey and Ecuador.
Rounding out the $1 Billion box office smashes in 2026 are The Odyssey, Michael Jackson and Super Mario. When you consider that on average, American moviegoers spend an additional $8 on refreshments, registers have been ringing. It’s been a good year for the movies.
The House of Mickey continues to roll with the times. Disney struck a deal with TikTok this week. It will allow creators to use characters and scenes from Disney movies and TV shows in short-form videos. This is the first agreement of its kind between the social media platform and a traditional media company. Intellectual property rights are essential. They have been threatened in this Digital Age. Disney owns such coveted characters and content. The company has been strategically navigating the landscape to embrace new platforms while protecting its brand.
America’s Economy continues to chug along at a solid rate. Q2 GDP, reported in July, came in at 1.4% growth. The strength was found in Consumer Spending, which grew at a 3.2% rate. Importantly, the Consumer accounts for 70% of economic activity. Trade deficits and a decline in government spending were the laggards. The American people keep spending, despite the nagging inflation and higher prices. The resiliency keeps getting tested.
The July job report brought an unanticipated fact. 23K jobs were lost. The Street was expecting an 83K increase. This was a big surprise. Government jobs shrank by 50K. Manufacturing and Restaurant hiring were barely up. What’s more, July saw the weakest annual wage growth in years. It didn’t stop there. The June job creation was revised down from 57K to just 20K. May was also lowered to 63K from 129K. The unemployment rate fell to 4.1%.
The surprising, bad news didn’t hurt the Stock Market. It actually triggered a boost upon release. Why does the Market like it? It gives the Fed more reason to pause and not raise interest rates. The 2-Year yield immediately fell like a rock. The 10-Year and the 30-Year fell too, though not nearly as much. From a Market standpoint, bad news is good news for economic data. The Market doesn’t necessarily want a rate cut. That would imply a weakening Economy. It just doesn’t want higher rates which could slam the brakes on growth.
Strong Corporate Earnings and solid Consumer Spending is a Bullish combo. Disney’s report this week reflects both. The things you can learn from a mouse. The Walt Disney Company has proven a useful barometer of economic activity and consumer sentiment for generations. All indications it’s still so. Both the Dow and S&P hit fresh all-time highs to start August. The Summer sizzle has brought lots of spending before students go back to school. America’s economic engine is humming. The job situation is critical and Bears are watching. People tend to spend more when they have an income. Pretty basic stuff. We pay attention. The Market seems to be ok with it for now. It likes the prospects of the Fed on hold. Keeping interest rates in check tends to support rallies well beyond Tech.
Have a nice weekend. We’ll be back, dark and early on Monday.
Mike
