Disney Reports Earnings and Reveals a 58% Drop in Operating Income from Parks and Cruises

With the coronavirus pandemic causing a lockdown across the world and businesses to shutter their doors, it is no surprise that Disney didn’t bring it this week with their second quarter financial results.

The company reported mixed results for its Q2 2020 earnings after the bell on Tuesday and it marked the first earnings report with Bob Chapek leading the company. Former CEO Bob Iger had stepped down in February and remains on as executive chairman.

For the second quarter the company reported earnings per share of 60 cents, excluding items and revenue of $18.01 billion. Wall Street was waiting for 89 cents and revenue of $17.80 billion, per Refinitiv consensus estimates.

Bob Chapek stated on the earnings call, “As you know, Disney, like many other companies, has experienced widespread disruption. In mid-March, we closed our domestic parks and hotels indefinitely, suspended our cruise line, halted film and TV productions and shuttered our retail stores. And while these were necessary steps to ensure the safety and well-being of our guests and employees, our businesses have been hugely impacted.”

Disney CFO Christine McCarthy said the company is suspending its dividend payout for the first half of the fiscal year in a move that would preserve $1.6 billion in cash assuming the dividend held constant at 88 cents per share. Total operating income was $2.42 billion in the quarter, down from $3.82 billion. This represented a 37% drop.

According to McCarthy, Disney would revisit and address the dividend again in the next six months once it is better able to assess the impact of the coronavirus.

Chapek said that Disney is “seeing encouraging signs of a gradual return to some sense of normalcy in China” and would reopen its Shanghai Disneyland park on May 11th with a phased approach.

Chapek noted that the park has about 80,000 visitors a day but due to government mandates, Disney can only operate now at 30% capacity, or 24,000 visiters. The CEO said the park would initially open operating well below that capacity and push it up to the 30% capacity over several weeks.

The company has furloughed about 100,000 employees as it suffers from shutdowns in its parks business, McCarthy has said.

Bob Iger said on the earnings call, “The Walt Disney Company has demonstrated repeatedly over its nearly 100-year history that it is exceptionally resilient and I believe this time will be no different. We entered this crisis with a strong hand and an exceptional management team now led by Bob Chapek. And as we said in February when Bob was announced as CEO, he and I continued to work in partnership in support of the Company’s objectives and to ensure a smooth and successful transition. As you would expect when dealing with a challenge of this magnitude the entire team is working closely together taking an all-hands-on-deck approach to address the difficult issues we’re facing.”

He added, “Of course, one key to our resilience is the strength of our brands and the strong emotional connection people have to them, Disney, Pixar, Marvel, ABC, ESPN and Star Wars. In fact, recent studies have shown we’ve maintained that connection with consumers throughout this crisis. We also have a tremendous collection of assets and beyond that what we create has never been more necessary or more important than right now.”

Disclaimer: We have no position in Walt Disney Co. (NYSE: DIS) and have not been compensated for this article.