Earnings topped out at 60 cents a share, a 63% tumble from the prior-year period. It was a drop that was expected as few companies have been harder hit by the public health crisis that’s ground travel to a halt, shuttered movie theaters, postponed live events and upended consumer behaviors. That’s been particularly devastating for Disney’s highly profitable theme parks. The company estimated that COVID-19’s impact had resulted in approximately $1 billion lost in its parks, experiences and consumer products business, and $1.4 billion in losses across all of its operations.
Revenues at the company did climb 21% to $18.01 billion, but that has largely to do with difficult year-over-year comparisons. Disney was a much smaller company when it last tabulated its first quarter earnings — its $71 billion acquisition of much of 21st Century Fox didn’t close until late March.
The financial picture was somewhat brighter than the investment community’s more dire predictions. Wall Street projected that the company would report adjusted earnings per share of 86 cents, which Disney missed, but its revenues were more robust than the $17.68 billion that most analysts had estimated the company would log.
Because of the global nature of its business, Disney began feeling the impact of the virus earlier and more intensely than other media companies. In January, it was forced to close its parks in Shanghai and Hong Kong. A month later, its outpost in Japan shuttered, and in March its resorts in the U.S. and Europe were closed. Disney also has a cruise business, which has been dry-docked until the crisis is alleviated. With travel restrictions in place across the world, it’s unclear when those businesses will swing back into profitability. The park closures resulted in the segment revenues decreasing 10% to $5.5 billion, while operating income fell 58% to $639 million.
One bright spot for the company has been the popularity of Disney Plus, the streaming service it launched in November. The subscription offering has added customers who are looking for diversions during the pandemic. Disney Plus reported that it has signed up 54.5 million subscribers in its first five months of availability. And yet, there have been a lot of expenses associated with launching Disney Plus and other direct-to-consumer services such as ESPN Plus. Disney’s direct-to-consumer arm saw revenues for the quarter increased from $1.1 billion to $4.1 billion, even as operating losses increased from $385 million to $812 million.
The pandemic hit as Disney was undergoing a leadership change. Bob Iger, the long-time Disney chief who oversaw the company’s acquisitions of Marvel, Pixar and Lucasfilm, is stepping down and will be replaced by Bob Chapek, the former head of its parks, experiences and consumer products division.
“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.”
Disney’s media networks arm, which includes cable channels such as FX and Nat Geo, as well as broadcast network ABC, helped cushion the fallout from the park closures. Revenues for the quarter increased 28% to $7.3 billion, with operating income rising 7% to $2.4 billion.
Studio entertainment revenues for the quarter increased 18% to $2.5 billion thanks to the success of “Star Wars: The Rise of Skywalker” and “Frozen 2.” But theater closures in the spring took a bite out of profits for the Pixar release “Onward,” resulting in a decrease in segment operating income of 8% to $466 million.
In a call with analysts shortly after Disney released its results, Iger said the company would be able to withstand the chaos wrought by coronavirus, noting that the company has been “exceptionally resilient” over its history.
Ultimately, he predicted, the company’s family-friendly image would help it re-emerge from the crisis.
“People find comfort in our messages of hope and optimism,” Iger said.
Shares of Disney closed Tuesday down 2.05% at $101.06, but shares were up slightly in after-hours trading.