Disney Reveals Massive Loss Of Income During Chinese Virus Pandemic – Suspends Dividend Payments
The Walt Disney Company revealed an insane loss of income due to the Chinese virus pandemic during their Q2 2020 earnings call.
Disney’s Senior Executive Vice President and Chief Financial Officer Christine M. McCarthy reported the company lost as much as $1.4 billion in income.
She stated, “From a financial standpoint we estimate the adverse impact of COVID-19 related disruption on our second quarter operating income was as much as $1.4 billion with the majority of that impact at our Parks, Experiences and Products segment.”
McCarthy added, “As a result, excluding certain items affecting comparability, earnings per share from continuing operations for the second quarter were $0.60.”
Despite announcing that the shut down caused by the Chinese Virus caused them to lose as much as $1.4 billion, McCarthy spun a positive tale.
She explained, “Our balance sheet and liquidity remains strong. Those who have followed the Company over the years know that we have historically taken a prudent approach to managing our balance sheet and liquidity.”
McCarthy added, “So despite the current business challenges, we believe we start from a position of relative strength.”
Later she stated, “We are evaluating a wide range of scenarios with respect to the potential ongoing impact of the COVID-19 pandemic on our businesses while prudently managing cash outflows and overall, we feel confident in our ability to manage through the crisis.”
Despite claiming the company was in a strong position, McCarthy did announce they would suspend their semi-annual dividend payout.
McCarthy detailed, “From a cash flow standpoint, the Board has made the decision to forgo payment of the semi-annual dividend for the first half of the fiscal year, which would have been payable in July.”
She continued, “This preserves about $1.6 billion in cash assuming we had held the dividend constant at $0.88 per share.”
Clownfish TV’s Kneon and Geeky Sparkles analyzed the earnings call describing it as “really, really bad.”
Geeky Sparkles elaborated, “They keep spinning it like, ‘There’s a lot of bad news, but it’s okay because we are Disney. Our brand means more and is more important than all of the bad news. That is literally what they kept doing.”
And McCarthy definitely did some spinning.
In order to justify a 11% drop in attendance at their domestic parks that include Walt Disney World and Disneyland she noted it was due to those parks shutting down.
McCarthy spun, “I’ll remind you that the Disneyland Resort closed on March 14th and Walt Disney World closed March 16th. We estimate the closure of our domestic parks had an adverse impact on attendance growth of approximately 18 percentage points.”
Not only was attendance at the parks down, but McCarthy also revealed that occupancy at their hotels were also down. McCarthy stated, “Per room spending at our domestic hotels was up 6% and occupancy was down 16 points to 77%, which reflects a 13% decline in occupied room nights. We estimate the closure of our domestic hotels had an adverse impact on occupied room nights of approximately 15 points.”
Disney executives also avoided questions on when they can expect to open their parks. Disney CEO Bob Chapek stated, “Frankly we would not reopen any park unless we can make at least a positive contribution to that overhead and operating profit level.”
Chapek was also noncommittal regarding major film releases relying more on hope than anything else. When asked about Mulan’s release and what kind of audiences they might see, Chapek answered, “We’re going to get a pretty good idea of that because there is a competitive movie that opens up one week before our film does.”
He added, “And at that point we’re hoping that there is some return to semblance of normal, in terms of number of screens that are opening in a number of showtimes for those movies. So our fingers are crossed.”
As Clownfish TV points out this massive loss occurred with Disneyland and Walt Disney World being shut down for about two weeks. The losses in Q3 are more than likely going to be much more substantial as their parks have not been open at all and it doesn’t look like they will be opening up anytime soon. Not only are their parks shut down, but films are also shut down for the time being.
What do you make of this massive loss of income? Do you think it bodes well for the future of Disney?