The Walt Disney Company's Disney Parks, Experiences and Products segment today reported a loss of $119 million on $3.588 billion in revenue for the quarter ending January 2, 2021. That's a 53 percent decline in revenue from the same period at the end of 2019, the final quarter in which Disney's theme parks were not affected by the pandemic.
"We estimate the total net adverse impact of COVID-19 on segment operating income in the quarter was approximately $2.6 billion," Disney said in its earnings report.
Revenue was down 70 percent at domestic parks, where the Disneyland Resort's parks in California have been closed since March and Florida's Walt Disney World has been operating at reduced capacity after reopening in July. Revenue was down 60 percent at international parks, where Disneyland Paris and Hong Kong Disneyland are closed after reopening for a period last year. Consumer product revenue - which is included in the Parks segment - was up two percent for the quarter.
In addition, Disney reported that for the Parks segment, "capital expenditures decreased from $1.3 billion to $0.8 billion driven by the temporary suspension of certain capital projects as a result of Covid-19."
"The Covid pandemic continues to present significant hurdles for businesses and communities across the US and globally. And most important, it has taken a tragic toll on way too many lives," Disney CEO Bob Chapek said in a conference call with investor representatives. "Fortunately, there have been some encouraging developments, particularly with the availability of a vaccine. And we're pleased to be doing our part by providing space at Disneyland for one of Southern California's major vaccine distribution sites. Today, more than 100,000 doses, have been administered at our location."
Chapek highlighted ongoing construction projects at Disney parks around the world, mentioning Remy's Ratatouille Adventure, Guardians of the Galaxy Cosmic Rewind, and Harmonious at Epcot, the Star Wars Galactic Starcruiser hotel at Walt Disney World, Avengers Campus at Disney California Adventure, Mickey & Minnie's Runaway Railway at Disneyland, and Zootopia at Shanghai Disneyland. Chapek did not announce any specific opening dates beyond "later this year" for Avengers Campus and 2023 for Runaway Railway.
Chief Financial Officer Christine McCarthy noted that the parks "all achieved a net incremental positive contribution for the periods during which they were open, meaning that revenue exceeded the variable costs associated with opening."
Looking ahead, Chapek said "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. That to us seems like the biggest lever that we have in order to either take the parks that are currently under limited capacity and increase it, or open up parks that are currently closed."
"I believe that Dr. Fauci said earlier today that he hopes that there's vaccines for everyone who wants them by April this year," Chapek said. "If that happens, that is a game changer. That could accelerate our expectations and give people the confidence that they need to come back to the parks. Will there be some overlap [with current Covid-19 safety protocols] until we know that we have herd immunity? Sure there will, but do we also believe that we'll be in the same state of six-foot social distancing and mask wearing in 2022? Absolutely not."
Chapek also referenced Disneyland's recent announcement that it would end its annual pass program, which Chapek called a "recasting."
"Everything we do is to exceed guest expectations, and it's very tough when your park has more demand than supply. We have to put limits on it," Chapek said. "We have a wide variety of margins depending on the nature of the guests and how they visit and when they visit.
"So with a lens towards maximizing the guest experience, we are now able to essentially reset many pieces of our business - both on the cost and revenue side of the business - in order to say, if we had a blank piece of paper, how would we set up our parks business and be you know a little bit more aggressive than we typically might be able to be without the impetus of, unfortunately, a year-long closure? So we've had a lot of time to think, particularly at Disneyland, about what could be. And I think you're about to see some of those strategies be born."
Disney's Q1 2021 report will be the final one where comparisons to the same quarter in the previous year do not include the effects of the pandemic in that previous quarter. Disney's theme parks began closing due to Covid-19 in the second quarter of Disney's 2020 fiscal year, starting with Shanghai Disneyland in January.
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