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Disney Posts Record Revenue, 19% Gain in Profits in First Fiscal Qtr of 2015

After finishing strong in 2014, the Walt Disney Co. started off its first fiscal quarter of 2015 with more record-breaking results, with revenue up 9% to nearly $13.4 billion, while net income rose 19% to around $2.2 billion.

Nearly every division at Disney reported double-digit profit gains during the three-month period that ended Dec. 27., with the exception of the media networks group, which reported a 3% gain in operating income on Tuesday.

“This was yet another incredibly strong quarter for our company, with diluted EPS up 23% driven by record revenue as well as significant growth in segment operating income,” said Robert A. Iger, chairman and CEO, the Walt Disney Co. “Our results once again reflect the strength of our brands and high quality content and demonstrate that our proven franchise strategy creates long-term value across all of our businesses.”

Given that the quarter’s timing came during the peak holiday shopping season, Disney’s consumer products arm saw the biggest gains, with sales surging 22% to $1.4 billion, which boosted profits by 46% to $626 million. Not surprisingly, “Frozen” merchandise generated much of the demand — the film’s merchandise drove double digit sales at Disney Stores in North America, Europe and Japan — followed by Disney Channel properties, Mickey and Minnie, Spider-Man and the Avengers.

The media networks group, Disney’s biggest moneymaker, generated $5.8 billion in sales, up 11%, while operating income at the division rose 3% to nearly $1.5 billion.

The cable networks were impacted by higher programming costs at ESPN, which caused that group to see sales decrease 2% to $1.3 billion, although Disney Channels and ABC Family enjoyed gains during the period from increased advertising spending.

Operating income on the broadcasting side increased 35% to $240 million for the quarter due to an increase in affiliate fees and higher program sales of shows like “Scandal,” “Criminal Minds” and “Once Upon a Time.”

The company’s studio rested on “Big Hero 6’s” shoulders, rather than the runaway success of “Frozen” as it did during the same frame last year, which caused sales to dip 2% to nearly $1.9 billion, although operating income at the division rose 33% to $544 million.

Disney cited stronger homevideo sales during the quarter, driven by Marvel’s “Guardians of the Galaxy,” “Frozen” and “Maleficent” versus “Monsters University” and “The Lone Ranger” in the prior-year quarter.

Last quarter, Disney had “Guardians of the Galaxy” and “Maleficent,” which boosted revenue by 18% and doubled profits. It still has more “Frozen” to help boost figures, with a themed short, “Frozen Fever” debuting this year.

Disney’s theme parks also saw a 20% improvement in operating income of $805 million, on a 9% increase in sales of $3.9 billion, as guests flocked to its resorts, especially in the U.S. Walt Disney World’s parks set quarterly attendance records during the period. Occupancy rates at its hotels was up to 89% during the period. Rising above that “is extremely difficult,” said CFO Jay Rasulo.

The company invested $638 into its parks overseas during the quarter, much of it going to the construction of Shanghai Disneyland. Another $239 million went into its parks Stateside. Among projects underway in the U.S. is the construction of an “Avatar”-themed land inside Animal Kingdom in Orlando.

During a call with analysts, Iger confirmed that Shanghai Disneyland will have its grand opening in spring 2016, although the construction of its rides and attractions will be completed by the end of 2015. Property will feature the company’s largest castle built for a resort.

Disney Interactive, which has been riding high thanks to the success of its mobile apps and “Disney Infinity” video game, continued to benefit from those titles during the quarter, including titles like “Tsum Tsum” and “Frozen Free Fall.” Profits rose 17% to $75 million, despite a 5% decline in sales of $384 million.

Last holiday, revenue for Disney Interactive soared 38% due to “Disney Infinity’s” launch. The latest update to that game was released in September.

Disney’s stock rose $2.17 to close at $94.10, gaining nearly 2.4% on Tuesday.

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