Disney’s Consumer Products and Interactive Media business’ operating income fell 2% to $617 million in Q1 ended Dec. 30 as revenue decreased 2% to $1.45 billion on lower merchandise sales tied to Frozen and Finding Nemo/Dory, Disney said. The downturn in revenue was partly offset by increases in sales of Cars and Star Wars-related product, including those tied to Star Wars: The Last Jedi, Disney said.

The decrease in merchandise licensing was due to “unfavorable timing” of Disney’s recording shortfalls in minimum guarantees, Disney said. “Star Wars licensing revenue included the recognition of revenue from merchandise based on Star Wars: The Last Jedi that was deferred in the fourth quarter of fiscal 2017. Minimum guarantee shortfalls are generally recognized at the end of the contract period. For contracts that ended on December 31, minimum guarantee shortfalls were recognized in the prior-year first quarter compared to the second quarter of the current year.”

Disney’s games business increased due to licensing revenue from sales of Electronic Arts’ “Star Wars Battlefront” title.

Overall, Disney’s Q1 net income jumped 78% to $4.4 billion (including “a $1.6 billion one-time net tax benefit associated with new U.S. federal income tax legislation”) on a 4% gain revenue to $15.3 billion, due to a 13% increase in parks and resorts revenue to $5.1 billion. The Studio Entertainment division reported a 2% decline in operating income to $829 million as revenue slipped 1% to $2.5 billion on lower sales of Cars 3 DVDs compared with Finding Dory a year ago.

Meanwhile, Disney will open two, 10-acre Toy Story Lands in Shanghai (April) and Orlando (late this year).

Contact:

Disney, Christine McCarthy, Chief Financial Officer, 818-560-1000, christine.mccarthy@disney.com