Disney begins comeback from a hard-hitting pandemic

By Rahul Vaimal, Associate Editor
Disney Image
Representational Image

The rapidly rising streaming video business of Walt Disney Co, the American entertainment conglomerate, and a partial recovery in its theme parks gave investors new hope that the entertainment industry had made it through the worst pandemic of the coronavirus.

The company’s stock jumped 5.6 percent to $143.12 in after-hours trading after Disney posted its quarterly earnings.

In the quarter, overall revenue dropped 23 percent to $14.71 billion, above the average forecast of around $14.2 billion by analysts. The forecast by experts of a more dramatic 70 cents per share loss was also beaten by Disney’s adjusted loss per share.

Online streaming

The focus on online streaming content was well timed for customers stranded at home, while the coronavirus pandemic crushed the company’s theme parks and movie studio business. Disney managed its less visited theme parks with smaller losses than analysts predicted.

“Disney will emerge stronger from this crisis,” said Haris Anwar, a senior analyst.

One year after the Disney+ online subscription was introduced to compete with Netflix, Disney reported that 73.7 million subscribers had signed up for the service.

“We will continue to increase our investment in streaming,” said Chief Executive Bob Chapek.

The streaming division lost $580 million for the quarter that just ended, less than the $1.0 billion that analysts predicted. But Mr. Anwar predicts that it will make a profit before 2024.

Parks and other segments

The outbreak of COVID-19 forced the business to close theme parks, cancel cruises and delay releases of movies. Disney said the pandemic reduced earnings by $2.4 billion at its parks unit.

“Even with the disruption caused by COVID-19, we’ve been able to effectively manage our businesses while also taking bold, deliberate steps to position our company for greater long-term growth,” Mr. Chapek said in a statement.

The parks have begun to welcome back tourists, although that progress is challenged by an increase in cases in Europe and the United States.

Recovery

Most of Disney’s theme parks were reopened during the quarter, including its flagship resort in Florida, but with restricted attendance, mask requirements and other safeguards. The business of parks and consumer products lost an operating income of $1.1 billion, less than analysts predicted.

Disneyland in California has been closed since March, and as virus cases soared in France, Disneyland Paris was forced to close for a second time in October. The possibility of a vaccine against coronavirus in 2021 could be vital for the parks.

“It’s still likely to take months and possibly years before business is back to where it once was, even with a vaccine,” analysts predict.

Mr. Chapek said Walt Disney World in Florida had reduced the number of people who could visit to 35% of the normal capacity.

The company also is seeing “very, very strong” demand for cruise ship bookings in the second half of fiscal 2021 and all of fiscal 2022, Mr. Chapek said.

The resumption of major sports helped improve ESPN in the media networks category. In operating profits, the unit posted $1.9 billion, up 5 percent from a year earlier.

Movie studio revenue fell 61 percent to $419 million, as new films were postponed by the company until 2021 and several theaters remained closed.

In order to fund its streaming service, Disney said it would forgo its semi-annual dividend for the second half of fiscal 2020.

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