Disney said Covid-related costs shaved $2.6 billion from parks’ operating income in latest quarter
An employee cleans the grounds behind the closed gates of Disneyland Park on the first day of the closure of Disneyland and Disney California Adventure theme parks, in Anaheim, California, on March 14, 2020.
DAVID MCNEW | AFP | Getty Images
Disney took another financial hit during its fiscal first-quarter, as restrictions on attendance at its open theme parks and the continued closure of its California parks weighed heavy on its bottom line.
There’s currently no timeline for the reopening of Disneyland, as the state of California has said it will not permit theme parks to reopen until coronavirus cases have fallen substantially in the surrounding community. Although the 7-day average of daily new Covid cases has fallen from the prior week in California, more than 1,000 new cases are diagnosed each day in the state, according to a CNBC analysis of Johns Hopkins University data.
“Where we have been able to reopen our theme parks with limited capacity, guests have consistently demonstrated a willingness and a desire to visit which, we believe, is a testament to the fact that they feel confident in the health and safety protocols we’ve put in place,” CEO Bob Chapek said during an earnings call Thursday.
The company said the outbreak cost this division around $2.6 billion in lost operating income during the December quarter.
Revenue at Disney’s parks, experiences and products segment fell 53% to $3.58 billion.
Disney has reported similar losses in each of its last three earnings. In the fourth quarter, the company said the coronavirus outbreak cost it around $2.4 billion in lost operating income during its most recent period. In the second quarter, the company had reported it lost $1 billion in operating income due to the pandemic, and in the third quarter, the pandemic cut its operating income by $3.5 billion.
Walt Disney World in Florida and Shanghai Disney Resort were open for all of the first quarter, while Disneyland and all of Disney’s cruise business was suspended.
Disneyland Paris was open until the end of October, about one-third of the quarter, and Hong Kong Disneyland was open until the beginning of December, or about two-thirds of the quarter. The company expects its Hong Kong location to reopen during the second quarter.
“In terms of the outlook for the parks for the rest of the year, and the capacity, it’s really going to be determined by the rate of vaccination of the public,” Chapek said. “That to us seems like the biggest lever that we can maneuver in order to either take the parks that are currently under limited capacity and increase it or open up parks that are currently closed.”
Chief Financial Officer Christine McCarthy said that for the parks that were open, the company was able to make a profit from guests. The revenue gained from park visitors outweighed the costs of being open. She also noted that the company is pleased with the number of reservations and bookings it is seeing.
As parks expand capacity and reopen, Chapek said there will be some level of social distancing and mask wearing for the rest of the year.
“Dr. Fauci said earlier today that he hopes there’s vaccines for everyone who wants them by April this year,” Chapek said. “If that happens, that is a game changer, and that could accelerate our expectations and give people the confidence that they need to come back to the parks.”
“Will there be some overlap until we know that we’ve hit herd immunity?” he said. “Sure we will but do we also believe that we’ll be in the same state of 6-foot social distancing and mask wearing in 2022? Absolutely not.”
