Disney Earnings: Parks Lose $1 Billion; Timing of Relaxing Mask & Distancing Rules
Walt Disney Company reported its first quarter earnings for October through December and forward-looking forecast for 2021 on an investor call held by CEO Bob Chapek. In this post, we’ll cover the good & bad of these results, plus updates on the future of Walt Disney World and Disneyland, including Disney’s internal expectations about the relaxation of face mask and physical distancing rules.
The first quarter of the Walt Disney Company’s fiscal year (the last quarter of the calendar year) was something of a turning point. While Disneyland remained closed for the quarter’s entirety and two of the international parks were partly closed, Walt Disney World was open. Not only was the flagship resort complex open, but it was the busiest post-reopening stretch of the year.
Less significantly for theme park fans but more so for the company, Disney+ had another stellar quarter. Even before the company released subscriber numbers, it was safe to say that Disney+ had crushed it. Investor Day was essentially a second launch for the streaming service, with a barrage of programming announced during the 4-hour event (see our post, Like 937 Things Announced for Disney+ During Investor Day, for specifics). And investors took note.
Following Investor Day, shares in the Walt Disney Company surge, with the stock price rising almost 14% to finish at $175.72. Trading volume was about nine times its normal level. In the two months since then, $DIS has maintained that momentum, edging above $190 per share as of February 2021.
Multiple Wall Street analysts have expressed further optimism about the Walt Disney Company’s stock, with many upgrading it to “buy” with price targets at or above $200. Investor enthusiasm is driven by the belief that Disney+ can achieve scale similar to industry leader Netflix. It’s also probable that the theme parks will become the beneficiary of vaccine availability and pent up demand for leisure travel in the second half of 2021, per analysts.
Against that backdrop, let’s start with a look the Walt Disney Company’s fiscal first quarter 2021 financial results. This was both better and worse than expected.
Forecasts called for revenue of $15.91 billion, but the actual total was $16.25–that’s down as compared to $20.86 billion year over year, but still better than expected. Consequently, $DIS has been up in after hours trading as soon as the results were released, so clearly Wall Street was pleasantly surprised…
Per usual, Disney+ was the expected bright spot. Subscribers to Disney+ surged even more than expected to 94.9 million, which is well ahead of the 90.2 million anticipated. Disney+ beating projections even after analysts have adjusted their expectations upwards for Disney+ after its meteoric success is really impressive.
It’s also worth noting here that Disney’s direct-to-consumer division includes ESPN+ and Hulu, which don’t grab the headlines but also performed very well. ESPN+ has eclipsed 12.1 million subscribers, almost double the number of a year ago; Hulu rose 30% to 39.4 million subscribers. It’s likely this was driven by advertising for the “Disney Bundle” which we saw pretty much nonstop during the Christmas season.
Of particular interest to us is Parks, Experiences and Products (or Parks & Resorts). Disney estimates that the total net adverse impact on that segment’s operating income for the third quarter was approximately $2.6 billion due to revenue lost as a result of the closures, capacity caps, and operational cutbacks–that’s lost revenue of over $30 million per day.
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. That might sound good as compared to the billions of past quarters, but keep in mind that consumer products are now under the same umbrella as theme parks…and the first quarter encompassed the holiday shopping season.
Remove all those toys from the equation and the numbers are worse. Walt Disney World and Disneyland lost $798 million for the quarter, while the international parks lost a collective $262 million. That’s just above an operating loss of $1 billion for the theme parks alone.
As with the previous two quarters, all theme parks that were open for a portion of the quarter covered their variable costs and made a net positive contribution towards fixed costs. Keep in mind that this does not mean Walt Disney World or any other park is profitable; it means the parks are losing less money by being open than they would lose by being closed. (Making this statement instead of “Walt Disney World is profitable” suggests that the parks are not yet profitable.)
Let’s get the rest of the bad theme park news out of the way so we can get to the optimistic stuff. Due to the ongoing closure, Disney CFO Christine McCarthy stated that the company has chosen to slow spending on capital expenditures in the parks.
Consistent with that, the Q1FY21 results document revealed that Disney spent $760 million on capex in the parks in the first quarter of fiscal year 2021 as compared to $1.3 billion spent in the previous year’s first quarter. Note that the previous year would’ve included work on Star Wars: Rise of the Resistance as well as Mickey & Minnie’s Runaway Railway, and there was going to be some degree of winding down of spending after that. But not cutting the number essentially in half.
Now let’s turn to the positives. Average daily attendance at Walt Disney World grew significantly in the quarter, and the operations team found “innovative ways” to increase capacity while maintaining health safety protocol. Disney indicates that they’re pleased with booking trends, as well as consumer sentiment for visiting in the future.
In terms of forward-looking projections for the second quarter (through the end of March 2021), Disney CFO Christine McCarthy indicated that Walt Disney World is facing “headwinds” in terms of seasonality and pessimism around current travel. This much has been obvious to us thus far in visits the last two months–as we covered previously, Crowds are Down Over 40% at Walt Disney World thus far during the winter off-season.
Additionally, McCarthy stated that Disneyland and Disneyland Paris would likely remain closed for the remainder of the current quarter, which was pretty much a given. They do expect Hong Kong Disneyland to reopen in the very near future, but that’s peanuts as compared to the other multi-park complexes over which Disney has sole ownership.
To kick off the Q&A, an investor asked CEO Bob Chapek about how park capacity increases would be undertaken. CEO Bob Chapek replied that capacity is “really going to be determined by the rate of vaccination of the public.” He further stated that Disney has ample demand for the theme parks, it’s the current attendance caps that are the issue.
This is actually something we’ve touched upon from time to time, most recently in our Walt Disney World 50th Anniversary Info post. Suffice to say, Disney is limiting attendance to roughly 35% of normal levels because of physical distancing requirements from the CDC. That is the upper limit on park capacity while adhering to health guidance based on Disney’s industrial engineering estimates.
Shifting to vaccination rate would be significant and potentially accelerate the timeline for relaxing rules and health safety protocol. It could allow attendance to increased, and with it entertainment and other costly offerings to be restored.
While it might be difficult to envision such a scenario right now as most vaccine-related headlines concern the slow rollout, but that has already started to gain momentum and will hopefully continue to improve. In fact, just this morning, Dr. Anthony Fauci told the Today Show that the pace of vaccinations will pick up as we get into March, and that by April, it will be “open season” for all groups to receive shots. That is great news for Walt Disney World, and alone cause for optimism!
A subsequent question specifically inquired about face masks and physical distancing even after the rollout of vaccinations. This is something about which we’ve been speculating for the last several months, as well.
In response to this question, Chapek stated that Disney has no doubt that parks will have “some level” of physical distancing and mask-wearing for the remainder of 2021. However, if vaccines are available to the general public per the April timeline above, Disney views that as a “game-changer.”
Chapek stated that there will be some overlap until herd immunity has been reached, but it won’t be the same as today. Specifically, he said: “Do we believe we’ll be in the same state of 6 foot social distancing and mask wearing in 2022? Absolutely not.” (Note: While Chapek did not specify whether he was referring to the fiscal or calendar year, these calls concern the former and financial topics are usually discussed as such. However, this is obviously not a financial topic. Regardless, FY22 starts on October 1, 2021.)
Editorializing a bit here, the most obvious way to accomplish this is shifting from rules to recommendations. This is something we discuss at length in When Will Walt Disney World Stop Requiring Face Masks? The analysis is pretty much unchanged from that post. In our view, Disney moving from reliance upon health expert recommendations to the vaccination rate is laying the groundwork for changing its approach to health safety protocol.
Ultimately, the financial results were about on par with what was anticipated. Familiar beats were hit–the resounding success of Disney+ and consumer products, with continued losses from the closure and scaled back operations of the theme parks. Some results were better than expected, others were worst. All things considered, no colossal surprises.
For most Walt Disney World fans (us included), the earnings calls are less about the financials and more about the trajectory and future prospects of the parks. There has been a lot of pessimism of late, in particular about the need to wear face masks and distance “indefinitely.” While this call did not set forth a definitive timeframe for the relaxation of rules (that would be premature and foolish), it did establish a new benchmark while also articulating the internal view at the Walt Disney Company. Between that and today’s optimism about the vaccine rollout, we’re excited for October and beyond at Walt Disney World. The last quarter of the calendar year and first quarter of the 2022 fiscal year could shape up to be a great one, with things starting to return to normal!
Planning a Walt Disney World trip? Learn about hotels on our Walt Disney World Hotels Reviews page. For where to eat, read our Walt Disney World Restaurant Reviews. To save money on tickets or determine which type to buy, read our Tips for Saving Money on Walt Disney World Tickets post. Our What to Pack for Disney Trips post takes a unique look at clever items to take. For what to do and when to do it, our Walt Disney World Ride Guides will help. For comprehensive advice, the best place to start is our Walt Disney World Trip Planning Guide for everything you need to know!
What do you think of Walt Disney Company’s first quarter earnings and future forecast? Are you likewise optimistic for October 2021 and beyond, or think even that is premature? Are you worried about the future of Walt Disney World, Disneyland, or the company in general? Excited by Disney+ continuing to do exceptional numbers? Think things will turn around in 2022? Do you agree or disagree with our assessment? Any questions we can help you answer? Hearing your feedback–even when you disagree with us–is both interesting to us and helpful to other readers, so please share your thoughts below in the comments!
I’m clearly in the minority when it comes to commenters on this blog, but I don’t mind the mask requirement. I find them mildly uncomfortable at worst, but then again I am also fine with wearing a tie all day and most guys act like that is the same as being strangled.
What is keeping me from considering a Disney trip at the moment is the missing parades and entertainment. I would be 100% fine with keeping masks all year if it allowed those things to return sooner, and I would not be at all surprised if physical distancing requirements are relaxed before masks go away. It would be in keeping with Disney’s current philosophy of emphasizing visible safety reminders even in objectively riskier situations (like indoor dining), and would allow Disney to increase capacity while still appearing concerned with guest safety.
“I would not be at all surprised if physical distancing requirements are relaxed before masks go away. It would be in keeping with Disney’s current philosophy of emphasizing visible safety reminders even in objectively riskier situations (like indoor dining), and would allow Disney to increase capacity while still appearing concerned with guest safety.”
I think there’s a good chance of that. A couple of the epidemiologists I follow recently discussed the “visible intervention bias,” which is essentially a softer term for health safety theater. (With that said, those same epidemiologists highlighted outdoor mask mandates as a prime example of visible intervention bias.)
My guess is that Disney ultimately lands on policies that don’t necessarily make sense from a risk mitigation perspective, but allow them to increase attendance levels while also luring back guests who are hesitant to visit right now. That’s why I think reduced physical distancing + masks recommended but not required will be the “halfway” goal. Not necessarily both at once, but before 2022.
I’m with on you both points. While it took getting used to, masks don’t bother me. In fact, looking at other countries, they seem to be the key component to regaining more normalcy. That means wearing an appropriate mask (not a scarf or gator), proper sizing, and keeping it over the nose and mouth. If I could trust my fellow Americans to do this, I would be fine with relaxed physical distancing and capacity restrictions. We are well beyond that though, so hopefully vaccines continue to speed up! Once we have ours, we will be eager to travel. However, we’re reluctant to pay Disney prices before things like parades and fireworks return. On the other hand, if we felt like enough was open to offset the bonus of lower attendance, then maybe. Suffice to say, we aren’t booking in advance. It’s a wait and see approach.
I admire you for not minding wearing a tie all day. Some people are tough. Others, like me, are like Princess Pea.
“visible intervention bias,” which is essentially a softer term for health safety theater.
Interesting. I take that to mean “doing it for looks.” If that’s what it means, it is possible that Disney might keep up the mask requirement for long past 2021. People may become more used to wearing masks. Masks, unlike social distance, don’t require park capacity limits. However, if Disney could soften the wording from “required” to “strongly recommended,” it would be a big help.
We are coming from England (hopefully) for 3 weeks October/November 2021 holiday was originally 2020, bringing the grand children for the first time, (mum and dad too) is there any update on the Mickey Not so Scary Halloween Party and the Merry Christmas Party too hopefully we will be able to get them both in if they are available.
We are visiting Orlando this entire month. Tho we are only going to parks once or twice a week, I have to admit wearing masks everywhere is not the big deal I thought it was gonna be. Granted it’s not been too hot/humid, but it really hasn’t been an issue… even for our Grandlittles ages 2 and 4. As far as reduced offerings for the same price, we look at it as an investment in the place we love, and a temporary one at that. That said, my favorite parts of the parks are missing. But for those like us visiting with little ones, low crowds and just focusing on rides has been a hit. Course I’m now terrified for the coming week because of your predictions for crowds
No worries. You are only going once a week, big crowd shouldn’t be a big deal. I envy you, being able to go to Orlando for a whole month, and not feeling bothered by masks!
Me too. I would never have believed this a few months ago but I’ve totally got used to them. They’re not my idea of a great time and I can’t wait for them to go (for so many reasons), but they wouldn’t impact my decision about whether or not to visit. It’ll be very interesting to see how I adjust when I return to the U.K. where outdoor wearing is simply are not a thing!
There’s a lot more wrong with DIS than Covid. When does this blog convert to WB/Uni?
I know this is selfish, but I just hope the crowds will be low for our trip in September. Pre anniversary lull maybe. I will bummed if there aren’t fireworks, but crowds are kind of always my biggest concern as far as scheduling a trip is concerned.
We have tickets and flights that were extended from 2020 (purchased in 2019!). At Christmas I picked up Covid while shopping, and gave it to the family. Our silver lining is we decided to take advantage of our 90 day bubble and go to WDW for Spring Break. The reality, though, is that the fatigue of Covid really lingers. I’m not sure how active we will be on the trip. But even if we just sit on a bench in the parks, it’s better than being at home.
We were originally supposed to go last May, but are now hoping to go the week of Thanksgiving this year. I really hope the mask requirement is gone by then, otherwise we have to reschedule again. My son is autistic and can’t wear one for any length of time. I get Disney gets to make their own rules, but it breaks my heart I keep having to delay his trip.
I have a trip planned for the end of October going into November. I will only keep my reservation if masks are not mandatory, parades, fireworks, meet & greets, fast passes, and fireworks are all back. Too much to ask? I think not. To me this is a huge part of the Disney experience. Without any of what I mentioned you are basically going from ride to ride and eating on the run. Just a glorified carnival in my opinion. I want all of Disney not just part of it and will cancel and rebook at a later date if life is not back to normal. Fingers crossed.
I don’t think any of that is “too much to ask.” Disney trips are expensive and what you want is an experience that’s commensurate with past offerings.
I do think all of that is “too much to expect” by late October. I would bet on at least a couple of those things still being absent/required by the fall.
Agreed! I want every old thing in Disney World to go back to normal before I will spend $15,000 to go there, which is how much my next trip is going to cost. I want covid to be NOT MENTIONED OR HINTED AT anywhere in Disney World. I want every resort, every playground, every restaurant, every club level, every boat/bus/monorail/gondola, every last garbage can to be available without covid restraints. I want every fireworks/character-meets/parades/tours/whatever to be back on schedule. I don’t use a lot of those things, but they all add up to the Disney atmosphere. That is, even if I don’t care to meet some character, it’s nice to see somebody else all excited to do it.
Tom, do you think Disney World will require the covid vaccine to enter the parks?
I wouldn’t rule it out as a possibility, but at this point, I do not think so.
There was pretty swift backlash against digital health passports. I suspect some employers will use them, as will some countries for entry (I think DCL use is more likely than WDW) but most businesses will seek to avoid them. I also think it’s going to be difficult to achieve herd immunity due to a lack of demand, but Disney and other businesses will use vaccine availability as a proxy. They’re probably tired of being mired in controversy over health policies.
That’s all total speculation on my part–I have zero inside info whatsoever. Your guess is as good as mine.
I wonder if a related way is airlines. They may require it while, say, your destination of WDW does not (though I agree many countries likely will want it alongside your passport). So it may be the case that those of us who have to fly will be required to show it just to get there.
The major airlines are largely against a vaccine requirement (especially for domestic travel). I highly doubt we will see a vaccine requirement for flying unless the federal government imposes one, and even then airlines are likely going to fight aggressively to prevent that from happening.
I am not excited about the vaccines, but I will take it if it means Disney World will get rid of all other covid restrictions. You would think that Disney can just do that rather than all this other stuff.
Thank you so much for the information and for your optimism. I find it interesting that so many people draw the line at face masks. Yes, they are irritating and can detract from so many things, but my line of demarcation is a little different. I’ll come back when Disney brings back fastpass (or at least some version of it – I’ll settle for virtual queues if I have to). The masks don’t bother me nearly as much as waiting in lines all day. We have a trip planned for November and if all the lines are standby only, I’m not sure I have the patience to handle that!
At this point, I suspect Disney won’t bring back FastPass or its spiritual successor until Disney Genie (or whatever the final name of the app ends up being) is ready for prime time. Debuting a free/paid hybrid seems like WDW’s probable course of action.
That could be ready to roll by October, but it wouldn’t surprise me at all if it debuts in 2022.
Fastpass, definitely! No fastpass, no going!
We have a September 2021 trip booked and paid for. We look at it as if masks are still a thing, then we get to enjoy low crowds and reduced capacity. If masks are no longer a thing, then we get to enjoy a normal feeling mask free trip. Either way, there’s something to look forward to!
That’s definitely a healthy and reasonable outlook!
“That’s definitely a healthy and reasonable outlook!” Sure. and desperate.
I was wondering about a timeframe for bringing back the fireworks and outside shows. We are going to go to WDW in early April, hopefully the mask rules will be relaxed a little. My wife and I are very optimistic about Disney; it has the “Wish” launching in 2022 and the new Star Wars hotel to look forward too.
“I was wondering about a timeframe for bringing back the fireworks and outside shows.”
That’s probably a bit too granular of a topic for an earnings call. I’d expect that to be announced via the Parks Blog or a press release. (Also, they probably don’t yet have specific dates for the return of nighttime spectaculars.)
We went over Thanksgiving and are going again in June. We are not bothered by the masks and I personally am not optimistic about vaccine rates for Spring and Summer to be high enough to lessen the mask mandate. Even if by some very small chance that the rate is high and rules are changed, I would hope they keep the social distancing in place a little longer. It is rather nice not to have strangers breathing down your neck while waiting in line.
“I would hope they keep the social distancing in place a little longer. It is rather nice not to have strangers breathing down your neck while waiting in line.”
I agree that it’s nice, but physical distancing is what’s keeping attendance caps low, which in turn has its own consequences on park offerings. I’m guessing Disney’s primary goal is to reduce physical distancing because that’s the biggest impact to the bottom line.
Pray all our lives get back to where we wanted them to be. There have been so many disruptions in all facets of all walks of life. It’s a little shallow to just think of the end of a Global pandemic in terms of wearing a mask in an amusement park. And I’m saying this as a DVC/AP Pass holder who cannot visit the parks because our family is high risk and have more important things to concern ourselves in the grand scheme of things. We will soon be to losing a considerable amount of non-bankable points, and as heartbreaking as it is, what can we do? Be well and may vaccinations turn out as Dr. Fauci has predicted. Peace.
“It’s a little shallow to just think of the end of a Global pandemic in terms of wearing a mask in an amusement park.”
Walt Disney World getting back to normal is not our paramount concern in life. Hopefully that’s the case for everyone reading this blog, as well.
However, it is the subject matter of this blog, so that’s the lens through which all topics are discussed. Improvements for Walt Disney World almost certainly mean improvements for society and life as a whole, so there’s reason for optimism in general. 🙂
Walt Disney World getting back to normal is totally my paramount concern in life. Is it “shallow to just think of the end of a Global pandemic in terms of wearing a mask in an amusement park”? Maybe, but that’s what I am. Shallow. Being deep isn’t all it’s cracked up to be.
I’m a DVC member and a bit of a “captive”. I’m going twice this year because I have points to use or lose. Of course, I love Disney World so much I’d probably make the two trips even if I didn’t have to!
Thank you for such an optimistic take! When I first saw that masks would stay for the remainder of 2021, my heart sank as I’m going in November. But your point about it likely being FISCAL year made me breathe a huge sigh of relief. I’m holding onto hope that restrictions will lift in October, although frankly, if they don’t, I will push my trip to spring 2022. WDW is such a special place to me that I don’t want to ruin it by going around in a mask, and I really want fireworks and character meet and greets. I also find it hard to wear a mask for a long period of time, as many do. I’m so encouraged that vaccines should be opening up in a couple of months and that Disney is thinking about moving past these restrictions. I think we all miss normality!
“But your point about it likely being FISCAL year made me breathe a huge sigh of relief.”
I don’t know if I’d go as far as to say Chapek was likely talking about the 2022 fiscal year. That’s usually how financial topics are discussed in the call, but this wasn’t a financial topic. It could go either way.
I’ve done quite a few Disney surveys recently and one thing that’s interesting (well, to me) is absolutely none of them asked about face masks. The more I think about it, the more promising I think that is – it’s evidence that Disney knows guests hate them and that they are non-negotiable right now. When questions about face masks start appearing on surveys, that’s the first indication of when Disney might soon consider them safe to remove and be testing the waters as to the balance of guest reaction in doing so.
I wouldn’t expect this to be a survey-driven decision. For one thing, it concerns health rules and those shouldn’t be decided by public sentiment. Disney will likely want to avoid that perception, even if public opinion factors into the decision.
For another thing, Disney’s surveys suffer from all sorts of biases. No need to do this one in house; it’s not what people think of Figment or the Skyliner. There’s much better data on general public sentiment around masks that Disney can acquire from third parties.
I just got a survey about how committed we are to our December trip. I put us at somewhat committed and got a series of questions about why I answered that way, what would get me to seriously commit, and what would make me cancel. Masks were an option to choose as well as hours, parades, fireworks, etc. We are firmly in the “no masks on vacation for these prices” category but this post gives me hope they may be optional and not mandatory soon. I really don’t want to cancel another trip!
That’s an interesting thought. Disney hasn’t even asked about face masks. Good to know.
We have booked our trip for Mid November, I’m hoping masks will not be
required by then, I’m not sure if we will go if masks are still required.
I think October 1, 2021 is going to be the target date for a lot of changes, but that doesn’t mean Disney will hit it. I could see November going either way at this point…too early to call.
I’m in the same boat. I will push my trip to spring 2022 if restrictions are not lifted in November.
We have a trip planned for the first week of May and hope demand does not increase too much! We were hoping to miss the spring break crowds and beat the summer crowds by going early May. I know it is sad to hope that things stay slow, but I was really looking forwards to reduced capacity and distancing. Our kids are teenagers so they don’t care about the characters and parades. They want to go for the rides and food 🙂
“We were hoping to miss the spring break crowds and beat the summer crowds by going early May.”
I think you will.
Even if the April prediction for vaccines being widely available is accurate, people who get shots in April won’t be fully vaccinated by May. That’s to say nothing of the many people who don’t get a shot by April. We’re still looking at late summer, early fall for herd immunity. I’m guessing that’s when Disney starts messing with capacity caps and rules.
That’s when we’re going, too. I have two older teens and two toddlers, none of who care about the extras at this point in time. I’m really hoping crowds will be light. We’ll be vaccinated by then, which gives me great peace of mind. Fingers crossed with you!
At least the DVC resorts should be a net sum zero since owners pay for all operations. Unless owners aren’t paying their annual fees or mortgages if they are out of work. Plus sales have been off since covid started.
DVC is also one of the big things getting people to Walt Disney World, and those owners/guests then spend money once in Florida. I doubt that’s something Disney wants to highlight on the earnings call since DVC members are something of a captive audience, but they’re probably a valuable type of guests right now!
I don’t really get the DVC ownership. I’d rather go to Disney when I feel like it. If I don’t go, I don’t pay, and Disney isn’t my problem. And now we are never going to WDW again in the foreseeable future because of my health reasons, but I am still interested in seeing Disney World getting back to normal.