Disney’s earnings take big tumble
Walt Disney Co. suffered a major decline in earnings in its third fiscal quarter, illustrating the severe damage dealt to the world’s most powerful entertainment company by the COVID-19 pandemic, which has kept Disneyland closed, cratered global tourism and delayed movie releases for months.
The entertainment giant posted a net loss of $4.72 billion for the three months that ended in June, Disney said Tuesday. That’s compared with the $1.43 billion in net income the company reported for the same period in 2019.
However, the media and entertainment titan did better in terms of profit than analysts expected, thanks in part to growth in its TV and streaming businesses. Excluding certain items, Disney posted a profit of 8 cents a share, down 94% from the same period of time a year ago. Analysts polled by Factset on average had expected a loss of 64 cents a share.
Total revenue for Disney was $11.78 billion, down 42% from a year earlier. Analysts had estimated $12.39 billion in revenue.
The driving force behind the earnings decline, of course, was the coronavirus. Disney estimated that its parks, experiences and products segment alone suffered a $3.5 billion hit to operating income because of the effects of the pandemic during the quarter.
Disney closed its domestic parks and Disneyland Paris in mid-march amid growing public health concerns. The crisis has taken a deep toll on the entertainment and hospitality industries overall, but Disney was particularly vulnerable. Its mighty movie studio primarily makes films designed to be seen in theaters, which remain largely shuttered in the U.S. And Disney’s biggest business — parks and resorts — have suffered from months of closures.
Disneyland remains closed indefinitely as the pandemic continues to grip California. Walt Disney World in Florida reopened last month with limited capacity and strict protocols.
Shanghai Disneyland was the first Disney resort to reopen, welcoming back guests May 11 with pandemicdriven restrictions and rules, including masks for employees and patrons. The company’s parks in Paris and Tokyo have also begun phased reopenings. Hong Kong Disneyland reopened in June, but shut down again last month because of a rise in coronavirus cases.
Revenue for parks, experiences and products, normally a powerhouse for the company, collapsed 85% to $983 million in the quarter. The division’s operating loss was $1.96 billion, compared with a profit of $1.72 billion during the prior-year third quarter.
“Simply put, the parks are bleeding cash, with no end in sight,” said Lightshed Partners analyst Richard Greenfield in a blog post ahead of the earnings release.
Tuna Amobi, an analyst with CFRA Research who has a “buy” rating on Disney’s stock, is more optimistic about the company’s prospects once the pandemic subsides.
“While the surge in COVID-19 cases gives us some pause, Disney seems well poised to gradually tap into pentup demand amid a phased reopening of parks, and a gradual return of live sports events,” Amobi wrote in a note to clients.
With no new theatrical releases, the company’s film studio generated $668 million in operating income, down 16% year over year. Revenue was $1.74 billion, down 55%. The studio’s highly anticipated “Mulan” remake has been delayed multiple times because of theater closures.
Disney on Tuesday announced a new plan for the release of “Mulan” that is sure to irk theaters. The company will offer the film for a $29.99 video-on-demand release on its streaming service Disney+ starting Sept. 4. The company will also release the film in theaters that are open in territories where Disney+ is not available. However, Disney Chief Executive Bob Chapek said the move is not a sign that Disney plans to pursue similar releases as a new business model.
“We’re very pleased to be able to bring ‘Mulan’ to our consumer base that has been waiting for it for a long, long time,” Chapek said. “But we’re looking at ‘Mulan’ as a one-off.”
On the bright side, Disney+ has surged, with 60.5 million subscribers. A Disney+ subscription costs $7 a month on its own, and $13 a month when bundled with Disney’s other digital offerings, Hulu and ESPN+.
Disney’s TV segment — which includes ABC, ESPN, Freeform and Disney Channel networks — gave the company a boost. Operating income was $3.15 billion, up 48%, thanks in part to an increase in profit from ESPN. The sports cable channel’s costs decreased dramatically because of the deferral of rights costs for Major League Baseball and NBA games as both leagues postponed their seasons. ABC also benefited from lower programming costs.