Disney (DIS) reported earnings on Tuesday for its second quarter, encompassing February, March, and April, and as expected, the results showed a major hit from coronavirus: $1.4 billion in total lost revenue, $1 billion of it from the parks division.
The company beat on revenue expectations overall, with $18.01 billion (compared to Wall Street expectations of $17.68 billion), but missed big on earnings, reporting 60 cents per share (analysts were looking for 86 cents).
Disney closed Shanghai Disneyland and Hong Kong Disneyland in January, Tokyo Disneyland in February, and its U.S. and France parks in mid-March. All Disney parks in the world remain closed right now.
But Disney sees light at the end of the tunnel. Disneyland Shanghai will reopen on May 11, “in light of the lifting of certain restrictions there in recent weeks,” new Disney CEO Bob Chapek announced on the Q2 earnings call.
The Chinese government wants the park to reopen at 30% of its normal capacity, or 24,000 visitors per day; Disney says it will actually reopen at “far below” that number and work its way up to 24,000. All employees and guests—everyone but costumed characters—will be asked to wear masks when it reopens.
As for the rest of Disney’s parks? “There is limited visibility into the timing of when we can reopen the rest of our parks and resorts, cruise ships, and retail stores,” CFO Christine McCarthy said.
As Disney examines when and how to reopen its parks, Chapek said, “The approach we take may include implementation of guest capacity and density control measures, and health and prevention procedures that comply with state and federal guidelines.” And the company is not worried out having to reopen parks at significantly reduced capacity at first: "Our hypothesis is, because of pent-up demand, that if we reopen with something less than 50% of our standard capacity, we're probably not going to have trouble filling that,” said Chapek.
Of course, it isn’t just parks. Disney’s cruise lines are closed, retail stores are closed, movie shooting is halted, and its subsidiaries ABC and ESPN have almost no live sports to broadcast. (ESPN did see an 11% viewership bump in the month of April thanks to the success of the virtual NFL Draft, which was the most-watched NFL Draft ever, and “The Last Dance,” the most-watched ESPN documentary ever.)
But the parks, typically the profit engine of the company, are the biggest focus. And other than Hong Kong Disneyland, McCarthy said all other parks had been “trending” much higher than the year prior—before coronavirus hit.
Amid the coronavirus closures, Disney’s parks segment had operating income of $639 million in the quarter, a 58% drop from Q2 2019. In Q1, parks profit had risen 9%.
Bob Iger, who stepped down as CEO in February and took the role of executive chairman, kicked off the earnings call with a note of optimism. “As someone who’s been around for a while, and led this company through some very tough days in the last 15 years,” Iger said, “I have absolute confidence in our ability to get through this challenging period.”
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Daniel Roberts is an editor-at-large at Yahoo Finance. Follow him on Twitter at @readDanwrite.
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