Entertainment giant Walt Disney Co. has recorded a 91% decrease in profits for the first three months of 2020, following the closure of its parks, cancelation of films, and reduced advertising income.
The coronavirus pandemic caused widespread damage to the businesses of Disney, from the closure of its twelve theme parks and cruises to the gigantic costs associated with its launch of the Disney+ streaming service.
The company's parks, experiences and products unit posted a 58% decline in operating income, compared to the previous year, as a result of theme parks and resorts closures globally. The company’s shares of stock also fell by around 2% in after-hours trading.
$1.4 billion Profit Decline
According to Disney, its operating income on its Parks, Experiences and Products segment decreased by approximately $1 billion due to lost revenue while it estimates the impacts of the coronavirus pandemic across all its businesses to amount to $1.4 billion.
All of the firm’s 12 Disney's parks in North America, Asia and Europe have stopped operations since March 15.
On the company’s earnings call, chief financial officer (CFO) Christine McCarthy said Disney will suspend its dividend payout for the first half of the fiscal year, which would preserve $1.6 billion in cash with the assumption that the dividend remain constant at 88 cents per share
McCarthy mentioned that the firm will revisit and address the dividend again in the next six months once it is better able to assess the impact of the virus.
The firm's advertising business, which supports its television income, also reported significant declines, as companies reduced marketing budgets and a lack of live sports that pushed viewers away from Disney's ESPN sports channel.
Re-opening of theme parks and positive outlook
Disney announced that it will reopen Shanghai Disneyland, which has been closed since January, on May 11, albeit in phases.
Disney chief executive officer (CEO) Bob Chapek said the company is “seeing encouraging signs of a gradual return to some sense of normalcy in China”.
"While it's too early to predict when we'll be able to begin resuming all of our operations, we are evaluating a number of different scenarios to ensure a cautious, sensible and deliberate approach to the eventual reopening of our parks," Chapek added.
He discussed that while the park typically has 80,000 visitors daily, the Chines government has mandated them to operate at 30% capacity or 24,000 visitors.
The Disney CEO expressed that he thought there was enough pent-up demand that people would visit the park once it does reopen in a limited manner. However, outside of Shanghai, executives warned that the timing of reopening remains uncertain.
Chapek emphasized: "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."
Meanwhile, Bob Iger, Disney's executive chairman and former CEO, affirmed Chapek’s statement.
"As someone who's been around for a while, and led this company through really tough days over the last fifteen years... I have absolute confidence in our ability to get through this challenging period, and recover successfully," Iger said.
