The entertainment company's earnings dropped 63 percent during the fiscal second quarter.
Walt Disney executives on Tuesday afternoon offered the first look at the extent to which the novel coronavirus has crippled their once seemingly indestructible entertainment empire.
During the fiscal second quarter of 2020, as the pandemic took hold around the world, Disney's recorded an estimated $1.4 billion impact on its income from continuing operations. Its Parks, Experiences and Products segment, impacted especially hard by the global shutdown, took an estimated $1 billion revenue hit.
Revenues at its other segments increased during the period but each felt an impact. At ESPN, advertising revenue decreased as a result of lower than typical viewership as live sports went off the air. Operating income within the studio group dropped 8 percent as movies like Pixar's Onward left theaters and stage plays stopped. One bright spot was the performance of Disney+, which forged ahead with its rollout in several European countries and India this spring despite global shutdown. The service now has 54.5 million paid subscribers.
Across the company, earnings per share excluding certain items dropped 63 percent to 60 cents for the quarter, below Wall Street's expectations. Quarterly revenue grew 21 percent to $18 billion.
It was a dour way to ring in Bob Chapek’s first earnings report as Disney CEO after taking the reins from Bob Iger, the man who oversaw a period of prosperity at the company, at the end of February. “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 in a statement. “Disney has repeatedly shown that it is exceptionally resilient, bolstered by the quality of our storytelling and the strong affinity consumers have for our brands, which is evident in the extraordinary response to Disney+ since its launch last November.”
Disney’s performance during the period doesn’t reflect the full impact of the coronavirus. That will come when the company discloses the financial results of the current quarter, during which its parks have remained closed, its cruise ships have stayed at port, its movies have sat unreleased and live sports have been off the air.
Analysts at both MoffettNathanson and Lightshed Partners downgraded Disney’s stock ahead of the earnings release, citing the uncertainty surrounding the business amid COVID-19. In April, S&P Global also downgraded Disney's credit rating, forecasting that its theme parks "won't likely return to normal capacity utilization at the same rate as the overall economy even after stay-at-home restrictions are eased."
Disney addressed the pandemic headwinds by cutting executive pay and stripping Iger of his salary. The company has also conducted widespread furloughs, which have impacted employees at Walt Disney Studios as well as Disney Parks & Resorts. In April, Disney also took out a $5 billion line of credit, bolstering its liquidity.
Disney shares closed the day down 2 percent to $101.09.
More to come.
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Disney Estimates $1 Billion COVID-19 Impact on Parks, Experiences Division - Hollywood Reporter
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