Disney saw its second quarter earnings hampered by the effects of the coronavirus pandemic.
While Disney’s revenue was enough to both top Wall Street estimates and improve over the year-ago quarter, its earnings-per-share plummeted 63% to 60 cents, coming in below Wall Street’s already-reduced estimates of 88 cents EPS. Disney earned just north of $18 billion in revenue, which analysts had projected to be $17.8 billion.
“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,” said Bob Chapek, Chief Executive Officer, The Walt Disney Company. “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, which is evident in the extraordinary response to Disney+ since its launch last November.”
The company was particularly hit hard by the closures of its theme parks, which shuttered in the U.S. in March and were closed in Asia in January. The parks, experiences and products division is Disney’s biggest revenue driver. The parks in Shanghai and Hong Kong have since reopened some restaurants and retail stores.
For the quarter, parks, experiences and products revenues decreased 10% to $5.5 billion, and segment operating income decreased 58% to $639 million. Disney estimates the total impact of COVID-19 on segment operating income in the quarter was approximately $1 billion. For its entire business, Disney said the global health crisis cost it around $1.4 billion, as the studio was forced to delay the release of popular films like “Mulan.” Next quarter won’t look any brighter with the push back of Marvel’s “Black Widow,” which was supposed to hit theaters last weekend, but is currently scheduled for November.
Disney also said it more than 33 million subscribers for Disney+ at the end of the quarter, up from the 26.5 million it reported the prior quarter, on March 28. During the earnings call, the company said it reached 54.5 million subscribers as of May 4, which puts Disney on track to reach its 2024 subscriber goal in the next quarter.
Hulu rose to 32.1 million subscribers in the quarter, which includes 3.3 million to its Live TV offering, while ESPN+ also increased its sub count to 7.9 million.
Revenues for the entire direct-to-consumer business increased from $1.1 billion to $4.1 billion, but segment operating loss also increased from $385 million to $812 million.
Revenues at Disney’s other segments increased, partially due to the fact that most of the coronavirus-led shutdowns happened near the end of the quarter. Media Networks revenues for the quarter increased 28% to $7.3 billion, and segment operating income increased 7% to $2.4 billion. That came despite a decline in ad revenue for ESPN, which lost most of its programming in the middle of March as sports were benched.
Within the studio group, operating income dropped 8% as movies like Pixar’s “Onward” were released just before theaters closed.
During its earnings call, Disney said it is canceling its summer dividend, which should save the company $1.6 billion.