Disney suffers $1.4bn hit due to coronavirus
Walt Disney Co suffered a $1.4bn (£1.1bn) hit to profits in the first three months of the year, as it closed its parks, cancelled movie releases and reduced advertising sales.
Every part of its business was affected by coronavirus, nearly wiping out profits for the quarter. Disney chairman Bob Iger said the firm was facing "unprecedented" challenges but he was confident of recovery. The firm is already planning to open its Shanghai park on 11 May. Chief executive Bob Chapek said the company would take a "phased approach", requiring advance reservations to limit attendance. It said it would require health measures, such as masks and temperature checks. "We are seeing encouraging signs of gradual return to some semblance of normalcy in China," he said. "While it's too early to predict when we'll be able to begin resuming all of our operations, we are evaluating a number of different scenarios to ensure a cautious, sensible and deliberate approach to the eventual reopening of our parks." Pent-up demand? The parks and cruise division has been a reliable profit driver for Disney in recent years, as the firm's giant media business tries to adapt to online competition and declines in paid-TV subscriptions and movie theatre attendance. But the parks business was hammered by the closings, accounting for $1bn of the $1.4bn hit to operating income, as the firm shut its parks in Shanghai and Hong Kong in January, in Tokyo in February and in the US and France in March. Its cruise lines have also suspended operations. Mr Chapek said he thought there was enough pent-up demand that people would come once the firm does re-open in a limited way. But outside of Shanghai, executives warned that the timing of re-opening remains unclear. The firm's advertising business - which supports its television output - is also seeing significant declines, as companies slash marketing budgets and a lack of live sports reduces viewers on Disney's ESPN sports channel. 'Ups and downs' Disney last year launched a new streaming service, Disney+, which had attracted 54.5 million subscribers as of 4 May - up from about 50 million on 8 April. But it remains loss-making. The direct-to-consumer and international unit, which includes Disney+, posted a loss of $812m in the quarter. "It's difficult to think of a company which better illustrates the ups and downs of the coronavirus outbreak and its effect on companies," said Nicholas Hyett, equity analyst at Hargreaves Lansdown. "While we think the business ... has one of the best asset bases of any listed company ... the damage the current crisis will do remains unclear." Disney said it was taking numerous steps to shore up its finances, including reducing capital investment plans by $900m and suspending a planned dividend payment. Last month, it stopped paying nearly half of its workforce, furloughing more than 100,000 employees, many of them park and hotel workers. Quarterly revenues were up 21% year-on-year at $18bn - beating analyst expectations. But profits fell to $460m from $5.4bn in the prior year, a 91% drop. "I have no doubt that we will get through this but it will take some time," Disney chairman Bob Iger said.