Walt Disney Company reports Q1 2021 earnings

Feb 11, 2021 in "The Walt Disney Company"

Posted: Thursday February 11, 2021 4:07pm ET by WDWMAGIC Staff

The 2021 first quarter earnings report from the Walt Disney Company continue to show the effects of the COVID-19 shutdown and subsequent reduced capacity at its theme parks.

The total net adverse impact of COVID-19 on the Disney Parks, Experiences and Product segment operating income in the quarter was approximately $2.6 billion. Revenue at the segment fell 53% to $3.58 billion.

Revenue was $16.25 billion vs $15.9 billion expected, and stock was up 1.5% as a result. The star performer continues to be Disney+ which now has 95 million paying subscribers.

“We believe the strategic actions we’re taking to transform our Company will fuel our growth and enhance shareholder value, as demonstrated by the incredible strides we’ve made in our DTC business, reaching more than 146 million total paid subscriptions across our streaming services at the end of the quarter,” said Bob Chapek, Chief Executive Officer, The Walt Disney Company. “We’re confident that, with our robust pipeline of exceptional, high-quality content and the upcoming launch of our new Star- branded international general entertainment offering, we are well-positioned to achieve even greater success going forward.”

You can view the full earnings report here, and below is the Parks, Experiences and Products statement.

Disney Parks, Experiences and Products revenues for the quarter decreased 53% to $3.6 billion, and segment operating results decreased $2.6 billion to a loss of $119 million. Lower operating results for the quarter were due to decreases at both the domestic and international parks and experiences businesses.

As a result of COVID-19, Disneyland Resort was closed and our cruise business was suspended in the current quarter. Disneyland Paris closed on October 30, 2020 and Hong Kong Disneyland Resort closed on December 2, 2020. Walt Disney World Resort and Shanghai Disney Resort were open in the current quarter. Our parks and resorts that were open during the quarter operated at significantly reduced capacities.

At our consumer products business, operating income growth was driven by an increase in games licensing revenue reflecting the release of Marvel’s Spider-Man: Miles Morales.
We estimate the total net adverse impact of COVID-19 on segment operating income in the quarter was approximately $2.6 billion.


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disneycpFeb 16, 2021

can you just stop? Your comments add absolutely nothing of value to this conversation. Thanks.

GoofGoofFeb 16, 2021

I wasn’t responding to you and I’m not sure why you see the need to attack every post I make. I don’t think anything I’ve said is controversial or inflammatory but I am sorry if I somehow offended you anyway. @JoeCamel said this thread was about the earnings call and I was just pointing out the 2 questions on the earnings call where they talked about the vaccine rollout and its impact on current year earnings. I posted the exact transcript. In any case I’m done with this back and forth so please don’t bother to respond to this telling me how I’m wrong again.

dreday3Feb 16, 2021

oh my gosh....

havoc315Feb 16, 2021

Ahh, you replace his actual words with wishful thinking. He talked about the "end of the year" but with no clarity if he meant the end of the fiscal year (9/30/21) or calendar year (12/31/2021). He said there was "no doubt" social distancing AND masking will still be in place through the end of the year. He did not say vaccine availability in April "would" make Disney accelerate their expectations. That's your wishful thinking. He said it "could" lead Disney to accelerate their expectations. Basically, all he said was, "no question we are going to have social distancing/masking through the end of 2021, and no doubt we will have less social distancing and masking in 2022. If vaccinations really speed up, we might be able to move up our own timeline a bit." You're turning that into, "if we stick to the current vaccination timeline, we are going to get rid of motion restrictions by summer!" Stick to what Chapek actually said, and what WDW is actually doing (not readying most entertainment for return, readying FOTLK for a modified socially distanced summer return, keeping thousands of on-site hotel rooms closed for the summer, etc). If one were to interpret Chapek's words with your level of spin, one could just as easily say, "full restrictions will be in place for the rest of 2021, but will start to relax in 2022. Maybe, if vaccinations start moving a whole lot faster, maybe WDW eases up on some restrictions a little sooner, a couple months after herd immunity." Now -- I don't believe that paraphrase is accurate either. It's an overly pessimistic paraphrase of Chapek's comments.

havoc315Feb 16, 2021

I'll let my posts stand, and yours stand. I've very clearly said I expect some changes over the summer -- Not nothing changes. I said we may see capacity increase to 40%, maybe even 50%. Some modified entertainment may return. But social distancing, masks, and capacity limits will almost certainly remain over the summer. You have suggested that by the summer, they will mostly eliminate social distancing, that they will allow pre-Covid summer attendance levels, etc;. That they won't cap attendance at 50% or lower, etc. You have suggested, your exact words, that with an effective vaccine rollout "most of the Covid restrictions are gone sometime this summer"... So yes, you're the one who said WDW may return to mostly normal before the fall. Which is pretty inconsistent with Chapek WDW statements and actions, which show no signs of removing "most" restrictions by summer, even under the best case scenario. Yes, I'm very confident that we will see some changes over the summer. But you're the only one I've seen strenuously arguing that "most" of the restrictions may be gone by the summer.

GoofGoofFeb 16, 2021

From the earnings call, talk on the financial prospects of the parks: Ben Swinburne Thanks. Good afternoon. Bob can you -- I know visibility is limited, but can you tell us how you think about the parks through the rest of this year? In particular, Christine mentioned strong underlying demand. But do you expect to be able to increase capacity limits and fulfil that demand? And as you do, are there things that you've done on the technology or cost side that can help us think about the ramp back to breakeven? Bob Chapek Okay. 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 can 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. So that is sort of the gating factor if you will. As Christine suggested, we have ample demand for our parks. Despite everything that's happening with that pandemic, I think we've made a pretty big impression on our consumer base and prospective guests in terms of the safety measures that we've undertaken at our parks to give assurances to people that they should come in and bring their families. And we're very, very pleased with what we're seeing in terms of future bookings. In terms of the cost savings and the technical side of things, not only has our industrial engineering team at Walt Disney World and some of our parks like Shanghai across the world figured out ways to have increased capacity with the same safety measures that we've had in place, which has enabled us to increase our, if you will, our attendance. But there we have been able to substantially manage our cost side at the same time to right-size, if you will, our -- not only our fixed cost base, but also our variable cost base to match what's happening. And I think that's evidenced by what Christine said that all of our parks, regardless of what conditions they're operating under, assuming they are operating, are in positive net contribution side. I would also add you didn't mention this, but I think it's important to add that given those per caps that Christine referenced in terms of the double-digit increase in per caps, this is sort of the ultimate situation where demand has exceeded supply. We've had that -- been fortunate enough to have that situation for the last couple of years and we've learned how to yield this business. And I think this is the ultimate situation where we've got supply greater than demand. So not only working on the cost side, but we're also working on the revenue side. And I think you see some of those results at play at Walt Disney World. Jason Bazinet Thanks. I just have a question on parks. Since the vaccine came out last year, the buy side has this soft expectation that anyone that saw a revenue downturn because of COVID will get back to 2019 revenues by 2022, once we have herd immunity and the vaccines distributed. And every once in a while, I read some article that suggests that social distancing will still have to be in place even when herd immunity is around and people will still have to wear masks. So, do you guys have any counsel or insight in terms of how you're thinking about sort of how the parks will operate by the time we get to 2022? And any reason, not to believe that we won't sort of get back to 2019 revenues assuming that the economy is fine and all that? Bob Chapek Yes. I won't specifically comment on whether we anticipate getting to 2019 revenues by 2022, but I will tell you what our expectations are in terms of the state of the world by then. We have no doubt that when we reopen up in parks that were closed or increase the capacity that we'll have some level of social distancing and mask wearing for the remainder of this year. That's our expectation. But I believe that Dr. Fauci said earlier today that, he hopes that there's vaccines for everyone who wants them by April this year. If that happens that is a game changer. And that could accelerate our expectations and give people the confidence that they need to come back to the parks. Will there be some overlap until we know that we've hit herd immunity? Sure there will. But do we also believe that we'll be in the same state of 6-foot social distancing and mask wearing in '22? Absolutely not. So in the 2 bolded sections Chapek is essentially saying that the outlook for the parks segment for this year (ends 9/30/21) will be determined by the rate of vaccination of the public. He also said that if Fauci is correct and the vaccine will be available for anyone who wants it starting in April that that would be a game changer for the parks and would accelerate their expectations. There were many other questions on Disney+ and other topics as well.

GoofGoofFeb 16, 2021

I haven’t seen anyone here arguing that life would return to normal before the Fall. There’s a big difference between nothing changing this summer and a full return to normal. I have said from the start of this discussion we would have a gradual easing of restrictions as cases drop and the vaccine rollout continues. I don’t believe we will need to wait until the Fall to see any changes. I’m not sure how me saying that if the manufacturers meet their targets we will have enough doses for anyone who wants one by end of May into June for 2nd shots has anything to do with being a denier. It’s a basic math equation. I said multiple times that manufacturing delays and/or failure to get enough people to accept the vaccine could delay the process. As far as WDW goes, they can and will see increased crowds and increased business before there’s a return to full normal.

rogerrabbitfan9Feb 16, 2021

As a long term investor, I’m not sure how relevant this years theme park numbers are going to be in determining how theme park demand will look long term. I think demand is going to too noisy between pent up demand and the lead/lag between when an individual gets a vaccine and when they are going to be willing to book/go on a Disney trip.

havoc315Feb 16, 2021

Actually, this whole discussion is about the earnings call and what Bob Chapek said at the earnings call. But it might be wise to refocus the discussion: Chapek's exact words (which are open to a bit of interpretation): We have no doubt that when we reopen up in parks that were closed or increase the capacity that we'll have some level of social distancing and mask wearing for the remainder of this year. That's our expectation. But I believe that Dr. Fauci said earlier today that, he hopes that there's vaccines for everyone who wants them by April this year. If that happens that is a game changer. And that could accelerate our expectations and give people the confidence that they need to come back to the parks. Will there be some overlap until we know that we've hit herd immunity? Sure there will. But do we also believe that we'll be in the same state of 6-foot social distancing and mask wearing in '22? Absolutely not So some aspects that are clear and not clear: Clear: "no doubt" that "some level" of social distancing and mask wearing for the remainder of the year. Unclear: Yes = fiscal year (though October 1, 2021) or calendar year (Dec 31, 2021) Clear: Won't be in "same state" of social distancing and mask wearing in 2022. Unclear" rapid vaccination will "accelerate our expectations." So unpacking it: There will be "some level" of social distancing and mask wearing through AT LEAST the end of September 2021. Further, there is a good chance we still have "some" social distancing and mask wearing in 2022 -- Just not the "same state." I read all that to mean things will be closer to the abnormal side through the end of 2021, and closer to the normal side by 2022. But not that all social distancing and masking will be gone by early 2022, and not that all current restrictions will be in place at the end of 2021. His talk of "accelerating expectations" does not suggest to me that mask wearing or social distancing will be gone any sooner than the fall. Just that, if everything goes right, they might *start* to relax those things sooner rather than later. The gradual timeline could get advanced by a month or 2. Maybe they bring back fireworks in July instead of September... maybe they bring back more entertainment in September instead of November... I wouldn't look at "accelerating our expectations" as suddenly we will get back to normal in April. Nothing about the vaccine rollout has dramatically changed since the earnings call. As of the earnings call, the "no doubt" expectation was that masking AND social distancing would be in place for the "remainder" of the year. There hasn't been a massive increase in vaccination rates in the 5 days since the earnings call... so I don't think anyone can assume that there has been any major change in the "no doubt" expectation.

havoc315Feb 16, 2021

And we’re behind the December vaccination schedule. More recent statements have been even more pessimistic. These are all February: https://www.google.com/amp/s/amp.cnn.com/cnn/2021/02/03/health/us-coronavirus-wednesday/index.html https://bestlifeonline.com/news-fauci-normal-warning/ COVID-19 is the leading cause of death in the United States, but an extraordinary year of vaccine science offers hope that the country can return to something resembling normal life by the end of 2021, said Anthony Fauci in a plenary address at the AAAS Annual Meeting. https://www.aaas.org/news/looking-back-and-forward-covid-19-anthony-fauci

dreday3Feb 16, 2021

That Fauci quote is from December...

havoc315Feb 16, 2021

That’s truly absurd. Not only do I want the vaccination rollout to succeed, I’m relatively optimistic. But I also follow the experts and public health officials. None of which believe we will be able to lift the restrictions on larger gatherings before the fall or winter. Throughout, we have had deniers who claimed that the end was right around the corner. It would all be over by Easter 2020 etc. Throughout, the experts have correctly warned that we had to prepare for the long haul. Now, most experts are hopeful we can start to return to normal by the fall. Fauci: https://www.google.com/amp/s/www.politico.com/amp/news/2020/12/31/fauci-covid-normal-life-fall-2021-453055

JoeCamelFeb 16, 2021

Y'all going back and forth over a few months. It is amazing that we might get 300M people vaccinated in as little time as it has taken. This saved thousands of lives any way you dice the numbers. I'm not sure if it is to make a point or be right on the internet. BTW - this is an earnings thread, I get that normal equals money but that is a stretch to tie it to an earnings call.

mharringtonFeb 16, 2021

So does Disney not investing as much in their parks from now on mean that they will never again be able to be as quality as they once were? By that, I mean, will they never be as good again?