Losses Continue at the Disney Theme Parks

February 11, 2021, 4:25 PM · 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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Replies (9)

February 11, 2021 at 4:43 PM

I presume that’s recasting like fishing rather than recasting like an actor... although with Disney’s theatre language you can never be too sure.

February 12, 2021 at 2:15 AM

Not a public health expert so if anyone is feel free to enlighten me. If the government is saying the vaccine should available to anyone who wants it in April, why are they also saying the pandemic protocols are going to last until fall? Lets say everyone gets the vaccination by May 1st and for extra protection we wait three weeks to build immunity after getting vaccinated that means everyone who wanted the vaccine will have immunity built up before summer. I don't understand why they are saying there is a slim to none chance the pandemic will be over before (at least in the USA) fall?

February 12, 2021 at 7:50 AM

@the_man - Even though everyone would be eligible to receive the vaccine in April, it will take well over 3 months (assuming a vaccination rate of 2 million people per day) to inoculate enough people to meet the "herd immunity" threshold (over 250 Americans). The other complicating factor is that most people will be receiving a 2-dose vaccine regimen that necessitates a 3-week wait between doses. So, it essentially takes nearly twice the amount of time, because those coming in for their second shot are taking capacity from those needing their first. The single dose vaccines that are in the process to gain authorization will obviously help speed things up a bit, but not enough to immediately affect the timeline.

Also, children are not recommended to take any of the approved vaccines yet since there haven't been any studies involving the youngest population. While it doesn't seem like the virus severely impacts children as much as it does adults, it's still important to vaccinate them so the virus doesn't continue to transmit and potentially mutate in ways that would make it immune to vaccines.

So yes, we're still in for a long slog even though the vaccines represent hope for a return to normalcy in the not so distant future.

February 12, 2021 at 8:51 AM

I would imagine, or hope, that by mid to late summer they would be able to up capacity, relax or eliminate social distancing and only just still require masks (Preferably only indoors).

February 12, 2021 at 12:33 PM

I was looking through the calendar and the pricing per day and most days are now upwards of 135 for a one park per day type of deal. Man... Has it been like this or is it a recent thing to make up for some of the losses? Regardless it just seems ticket prices are going up in price exponentially the last couple of years. It seems just like yesterday a one day ticket was 110. That couldn't of been more than a few years ago.

February 12, 2021 at 1:57 PM

After WDW crossed the $100 threshold in 2015, which was shortly after they started charging more for MK than the other parks, it's been a constant and steep march upwards. The date-specific pricing (demand-based pricing) has allowed Disney to increase prices even more sharply, because the increases on busy days (weekends and holidays) are aggregated with lower prices on weekdays over longer visits. When you're buying 5-day tickets, the $10 increase to visit on a Saturday is offset by just a $2 increase to visit on Friday and the $1 increase to visit on Thursday. While Saturday's ticket increased by $10, the 3-day ticket only increased $4.33/day.

The problem I see is the eventual move to a purely dynamic-based pricing model where prices are constantly fluctuating based on demand (like airline tickets and the event ticket resale market). Once that transition occurs, there will be no way to tell what is a "good" deal versus what is expensive anymore. I'm actually a bit surprised that Disney has stayed away from COVID surcharges on vacation packages that are starting to become more prevalent in the industry.

February 13, 2021 at 3:34 PM

This is unfortunate. I hope this epidemic will end and life will return to normal,


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February 13, 2021 at 8:14 PM

Simply Wall Street (02/13/21): “Investors in The Walt Disney Company (NYSE:DIS) had a good week, as its shares rose 3.6% to close at US$188 following the release of its quarterly results. Walt Disney beat expectations by 2.3% with revenues of US$16b. It also surprised on the earnings front, with an unexpected statutory profit of US$0.01 per share a nice improvement on the losses that the analysts forecast. This is an important time for investors, as they can track a company's performance in its report, look at what experts are forecasting for next year, and see if there has been any change to expectations for the business.”

February 16, 2021 at 12:39 PM

@the_man Don't forget too that the vaccine isn't a cure-all. Even with the vaccine you can still get the virus (though it's less likely to make you seriously ill), and the virus has far less efficacy on the South African strain. And like someone said, your kids won't get a vaccine, and will remain susceptible to the virus (though their chances of getting seriously ill are lower).

Bottom line: the vaccine isn't the end of the story, so we'll be masked up for a while, which is good.

Happy to see Disney _finally_ pitching in on the virus effort, though I haven't forgotten all the counterproductive (and sometimes hateful) nonsense Chapek was spouting last year. Every year that goes by, Disney moves further away from its image . . .

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