Disney lost $1.4 billion due to coronavirus last quarter
Walt Disney Co.'s latest financial results reveal just how badly the coronavirus pandemic has walloped the entertainment giant. The company on Tuesday said the total loss across its theme parks, retail stores, TV operations and other units amount to $1.4 billion, while its earnings fell by more than half.
Most of the damage, or $1 billion, came from the company's closed theme parks in California, Florida, Paris, Shanghai and Tokyo as well as docking its cruise ships, the company said while releasing second-quarter earnings. Overall revenue rose to $18 billion, up 21% from a year ago and in line with analyst forecasts, but that was dressed up by its previous purchase of 21st Century Fox's entertainment assets. Disney's earnings fell 91% to $475 million, down sharply from $5.4 billion in the year-ago period.
"The impact of COVID-19 and measures to prevent its spread are affecting our segments in a number of ways, most significantly at Parks, Experiences and Products where we have closed our theme parks and retail stores, suspended cruise ship sailings and guided tours and experienced supply chain disruptions," Disney said in a news release.
Disney World and Disneyland were closed by March 15 as coronavirus cases increased across the nation. Days later, Disney halted its cruiselines. The company's retail stores and theater shows also have closed.
Disney hasn't announced when it plans to reopen its U.S. theme parks. The company is likely losing about $500 million for every two weeks the Florida and California theme parks remain closed, Chief Financial Officer Christine McCarthy said during a conference call with analysts.
The company plans to reopen Shanghai Disneyland on May 11, CEO Bob Chapek said on the call. Guests and employees will be required to wear masks. Chapek said the theme park, which closed in January, typically sees 80,000 visitors per day, but the reopening will set a limit of 24,000 a day for the first few weeks.
Analysts said Disney is in a difficult position when it comes to reopening its theme parks. If parks reopen too soon, Disney could lose money if attendance is weak, said Richard Greenfield of LightShed Partners, in a research note ahead of Disney's latest quarterly report. And if the parks remain closed, the company is paying monthly expenses for the space without generating revenue. It "feels like a lose-lose," Greenfield said.
Devastating impact
TV production at Disney-owned ABC has been delayed and release dates for movies, including a live-action remake of Mulan, have been postponed. Mulan will now be released July 24 and Marvel's Black Widow will be released November 6. Disney could release films sooner to help boost revenue this year, but there's a risk of losing box-office sales with that move, Greenfield said.
Disney's earnings loss has meant pay cuts from top to bottom. The company slashed pay for many executives, including cutting chairman Bob Iger and Chapek's compensation in half. Those cuts will remain "until we see a substantive economic recovery," Chapek said. The company also furloughed some 43,000 employees last month.
"The COVID-19 pandemic is having a devastating impact on our world with untold suffering and loss, and has required all of us to make sacrifices," the company said in a statement last month. "Mandatory decrees from government officials have shut down a majority of our businesses."
By contrast, Disney's streaming services are still churning a profit for the company. Hulu subscribers have reached 32 million, the company said.
Disney Plus, which launched almost six months ago and now has more than 50 million subscribers globally, could continue to grow as Americans hunker down under stay-at-home orders and the company introduces the service to other countries. The new service contributed to an almost $3 billion revenue increase for direct-to-consumer and international business.
"What we create has never been more necessary or more important than right now," Iger said. "In fact, it's quite possible that what we create is appreciated now more than ever."
Most of the Disney Plus growth came from the company launching the service in western Europe and India, company officials said. Disney plans to offer the service in Japan in June and Latin America at year's end.
—The Associated Press contributed to this report.