Disney’s earnings plunge as coronavirus shutters parks and cruise ships

By: Alexandra S.

Disney’s earnings dived in the second quarter, including a $1 billion drop in operating income tied to its shuttered theme parks and cruise ships.

The Burbank, Calif-based company on Tuesday said mid-March closures of its theme parks, including Disneyland and Disney World, as well as the docking of its cruise ships, sent operating income in its parks, experiences and products unit down 58 percent in the second quarter compared to last year.

Across all divisions, the virus shaved $1.4 billion off its income as the coronavirus has also delayed the release of Disney’s summer blockbusters.

The one bright spot was increased engagement on its newly-launched streaming service, Disney+, which has logged 54.5 million paid subscribers since it launched last November.

The company posted adjusted second-quarter earnings of 60 cents a share, down from $1.60 a share in the year earlier quarter, and below Wall Street’s expectations for adjusted earnings of 88 cents a share, excluding items. Revenue rose 20.7 percent to $18.01 billion for the quarter ended March 28, above Wall Street’s expectations for sales of $17.81 billion.

Calling the challenges linked to the virus “unprecedented,” executive chairman Bob Iger, who stepped down as CEO in February only to resume a lead role in April, acknowledged that the pandemic “hit us hard” and advocated for a “all hands-on-deck approach.”

Disney’s shares fell nearly 3 percent in after-hours trading as questions emerged about when Disney will be able to reopen its parks.

Iger’s successor, CEO Bob Chapek, said the company is looking at a “cautious, sensible approach” to reopening parks. Density control, limited capacity, health measures, such as temperature checks, are all on the table. The CEO said the company would reopen Shanghai Disneyland Park, which was shuttered in January, on May 11, but didn’t offer guidelines for other park reopenings.

“While the COVID-19 pandemic has had an appreciable financial impact on a number of our businesses, we are confident in our ability to withstand this disruption and emerge from it in a strong position,” Chapek said.

Chapek said he is “confident” Disney will weather teh storm and “emerge from it in a strong position.”
But eMarketer analyst Ross Benes was more skeptical, as he marveled at how the virus has debilitated the media giant, turning some of its “greatest strengths” like its parks and its movie studio, “into its greatest vulnerabilities.”

“Theatrical releases and theme parks, long-time profit centers for the company, are losing money in the short-term and have no clear path to recovery until improved treatments or vaccines make consumers comfortable to venture back out into large crowds,” he said. “Disney+ quickly amassed an impressive number of subscribers, but its impact on the broader company is limited as long as theaters and theme parks stay closed.”