Disney Quarterly Results: Parks Lose $1.1 Billion–But Bookings & Capacity Increasing!
Walt Disney Company reported its fourth quarter earnings for July through September and forward-looking forecast for 2021 on an investor webcast with CEO Bob Chapek. This post covers the good & bad of these results, plus updates on the future of Walt Disney World, Disneyland, Disney Cruise Line, Disney+, and more.
As you might recall, the third quarter was a perfect storm for the Walt Disney Company. That entire stretch was when Walt Disney World and Disneyland were both closed, there were no notable live sports for ESPN to air, and no Disney theatrical releases debuted. It turned out to be a pretty bad quarter, with Parks, Experiences and Products losing $2 billion.
With Walt Disney World being open for almost the entirety of the fourth quarter, albeit at a reduced capacity, and other bright spots emerging for ESPN, Disney+, and other business units, analysts had higher expectations for the fourth quarter.
Even before the earnings webcast, the stock of Disney and other travel industry companies got a boost earlier this week with Pfizer’s announcement that its experimental vaccine was more than 90% effective in a late-stage clinical study, raising expectations of a breakthrough in the ongoing fight.
Pfizer is expected to apply for an emergency use authorization later this month after collecting further safety data. Health officials believe distribution could begin before the end of the year to vulnerable groups, with it being widely available by Spring 2021. Consequently, Disney’s stock shot up on Monday before rising again in after hours trading when these quarterly results were released.
The Walt Disney Company shares rose as much as 6% in after hours trading, driven primarily by the news that Disney+ had surpassed 73.7 million subscribers, blowing past projections for the quarter. The success of Disney+ is even more remarkable considering Disney’s goal for the streaming service back last year at its launch was to reach 60 million to 90 million subscriptions by 2024!
Disney+ and streaming in general also came up repeatedly during the webcast, with the salient points being that Disney plans to accelerate and emphasize the direct-to-consumer business and that more concrete plans will be revealed during the upcoming investor day. There are also plans to direct more of the company’s spending on content creation for the streaming services. While that doesn’t directly pertain to theme parks, it certainly doesn’t bode well for their overarching role in Disney’s vision for the future.
Turning to theme parks directly, Disney Parks, Experiences and Products revenues for the quarter decreased 61% to $2.6 billion, and segment operating results decreased $2.5 billion to a loss of $1.1 billion. This was largely attributed to declines at both the domestic and international parks and experiences businesses. Notably, Disneyland Resort and Disney Cruise Line businesses were closed for all of the fourth quarter.
In total, revenue was $14.71 billion, beating expectations of $14.20 billion. However, diluted earnings per share for the quarter was a loss of $0.20 compared to income of $1.07 in the prior-year quarter.
Chapek reiterated the track record of success in safely reopening Walt Disney World and the other parks, and reiterated their disappointment with the state of California. He stated twice that Disney’s policies are based on science (mirroring the language used ad nauseam by Governor Newsom) and noting that the reopening had the support of labor unions, local government leaders, and health officials.
“We believe [California] leadership should look objectively at what we’ve achieved successfully at our Parks around the world, all based on science, as opposed to setting an arbitrary standard that is precluding our cast members from getting back to work,” said Chapek during his opening remarks.
As with the previous quarter, Disney CFO Christine McCarthy indicated that Walt Disney World is covering its variable costs and making a net positive contribution towards fixed costs. Note that this doesn’t mean that Walt Disney World is profitable—it means the parks are losing less money by being open than they would lose by being closed. (To the contrary, by making this statement instead of “Walt Disney World is profitable,” the logical inference is that it is not yet profitable.)
On the call, McCarthy also noted that there’s has further confidence for Walt Disney World, with the bookings at 77% for the first quarter of 2021, and almost fully booked for Thanksgiving week. While that number might sound good, it’s lower than a normal holiday season, which is Walt Disney World’s peak stretch of the year.
When it comes to occupancy and resort reservations, it’s noteworthy that the vast majority of non-Disney Vacation Club resorts are still closed, meaning the number of available hotel rooms for calculating the occupancy rate remains depressed. Those ongoing closures make it difficult if not impossible to contextualize the current bookings against historical numbers.
In many hotel stays over the last few months, our anecdotal experience has been that guest numbers are “improving” but still nowhere near normal levels. I’m curious what occupancy and bookings are looking like for January and February.
During the Q&A, Chapek indicated that he’s optimistic about the efficiency gains at the theme parks, noting that the operators have been able to increase capacity while staying within CDC guidelines. He said that Walt Disney World was previously at 25% capacity, but has been able to increase that to 35% capacity while still adhering to local health guidance and physical distancing requirements.
This comes as little surprise to us, having experienced Walt Disney World regularly in September (including over Labor Day weekend when all parks were “sold out”) versus October and November. It’s nice to hear Chapek finally state this, as on a recent call with CNBC, he stated that the parks were still capped at 25% capacity. We called that disingenuous (at best) at the time, and pointed out that regardless of fuzzy math, the bottom line is that the number of guests entering Walt Disney World’s parks has gone up each month since reopening.
Chapek also briefly touched upon the future prospects for both Disneyland and Disney Cruise Line. For the former, he expressed the belief that the California parks would remain closed through the end of the current quarter, or January 2021.
As for Disney Cruise Line, Chapek stated that the new guidelines from CDC present some really high hurdles, but also “light at the end of the tunnel.” He said demand is high for cruising, especially during the second half of 2021 and into 2022. Perhaps the biggest surprise of the call was that Disney is still anticipating delivery of the Wish in Summer 2022, with the other two pushed back to 2024 and 2025. (The surprising part, to me at least, is that Disney hasn’t cancelled its order on 1-2 new ships.)
Ultimately, still a bad quarter if comparing year over year results, but it seems the Walt Disney Company is through the worst of this, with significantly better results than the previous quarter. There’s similar optimism for Walt Disney World, especially after conceding during the last call that results were below expectations, with cancellations higher than anticipated and utilization of the parks lower than expected.
Each subsequent quarterly report should go similarly, with incremental improvements as more travel resumes, Disneyland and Disney Cruise Line come back online, and demand for Walt Disney World continues to grow. While ongoing recovery of the parks is priority number one, at this point, we’re also somewhat concerned that the company’s “pivot to streaming” could impact the future development and projects at Walt Disney World and Disneyland to a significant degree.
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 fourth quarter earnings and future forecast for the first quarter of 2021 and beyond? Are you worried about the future of Walt Disney World, Disneyland, Disney Cruise Line, or the company in general? Disappointed by the increased emphasis on streaming? Think things will turn around in 2021 or agree that there’s light at the end of the tunnel? 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 want Michael Eisner back. Once the truth came out about Roy Disney Jr. I understood why Walt did not want him to run the company. These business moguls do not understand what Magic is. Just the bottom line.
Right now, I’m less concerned with the focus on Disney+. Speaking from an organizational and financial point of view, this shouldn’t impact Parks, Experiences and Products. This is a shift in emphasis and spending from traditional methods of selling films and television, often time to third parties not owned by Disney, to a more direct-to-customer format. If anything, I was more concerned when Consumer Products and Interactive Media was merged into Parks and Resorts two and a half years ago.
If you want to worry about Disney park changes, I am more concerned about the possibility that non-local/regional park attendance may not recover quickly from the coronavirus enough to financially justify increased spending. (I’d need to know more about conditions at the parks outside the U.S. to know if I’m actually concerned or just more concerned than the shift away from selling video to movie theaters, cable and Netflix.) I suppose keeping the DCL orders for more ships may be a shift away from park spending; then again, it may be that Disney figured out that low interest rates help justify increased investment now.
If Disney is complaining so much about losing money why don’t all off their over paid executives take a big pay cut. I’m sure that they will be able to live on what they pay their employees (not).
Aren’t we done with this tired old erroneous fallacy yet? It’s really simple math and basic contract law.
I am not trying to stick it to the rich, I have no problem with them making money. But, in theory, one of the reasons executives make so much money is because they are responsible for many people’s jobs (see livelihood), but also because they are supposed to be rewarded when the company does well. So it’s high risk high reward on their part. So as unpalatable as it may seem, this would be the time when they would not be making very much money.
The underlings however have low risk lower reward jobs, one thing (in theory) that comes with a lower paycheck is job security and a steady consistent paycheck.
All of this is in theory of course.
Maria – in your zeal to cut Disney execs pay, let’s not forget that cutting their pay does nothing for the thousands of laid off Disney hourly employees. Please don’t forget them. We should all write to Gavin Newsom, and request he let these people return to their jobs. Many are now destitute, and many more soon will become destitute.
By fourth quarter earnings, I’m guessing you really mean third quarter? 🙂
Disney starts their fiscal year on October 1. It was fourth quarter by their fiscal year. Maybe third quarter by calendar year.
Just like the US government, fiscal year runs 10/1-9/30.
Thank you Deb and Mrnico, I stand corrected. 🙂
When do you think DCL will set sail again?
I don’t follow DCL super closely, but I’d be surprised if it’s before March 2021.
Tom, your optimism about steadily increasing numbers attending WDW doesn’t seem to include thoughts about the rapidly increasing COVID-19 numbers throughout the US, including Florida. Biden has promised to take measures to control infection rates. Whilst this could just be more emphatic requests to wear masks, it could well pressure states to reintroduce business closures. Ignoring the politics of those decisions, the rising numbers and rapidly-filling ICU departments mean the choice is to accept exponentially rising hospitalisations and deaths, or go back to some lockdown measures. Doing nothing until a vaccine is approved, manufactured in bulk, and administered (with 3 weeks between doses), means thousands of deaths between now and early 2021. I doubt the current administration will do much based on their current track record, but that could change on Jan 20th.
Gary a really sound comment. Here in Aus we’ve finally seemingly got it under control and are seeing only literally a handful of cases each day, and some days with even zero cases. Yes we’ve had lockdowns and strict social distancing as well as mask requirements – some of which I dont agree with – particularly now that we are so low but still with restrictions in place. For example there are still limits on home visitations, dining etc here in my home state of Victoria which was the hardest hit in Aus.
BUT 14 Days of zero cases and zero deaths is a long way off what you guys are unfortunately seeing right now. I do hope that somehow people understand that a period of isolation will and can make a difference – this is why much of Europe has returned to lockdowns and restrictions.
The noise around the election and result has drowned out the truely frightening number of daily cases the US is seeing right now of 100,000+ per day over the last week, not to mention nearly a 1000 deaths per day.
I know I’ll get flamed for this post by some but I do also hope for the sake of everyone people start to take this threat more seriously so that the world can return to a more functioning community. Further with the seemingly little affect it had on a certain individual that wont concede this hasnt helped the cause either.
Be safe and with luck we can return to the US soon and revisit the parks we so enjoy again. Perhaps the only remaining parks we havent visited yet in the world might be more realistic, Tokyo DL (been to Disney Sea) and perhaps Shanghai DL
Blah blah on this post. I typically do not post comments but I think we should let the experts handle what happens in Disney. Apparently they are one of the only theme parks that actually have a strong grasp on what’s going on. The review states they are taking precautions from a scientist stand point and not just enforcing random regulations and rules. If you wear your mask like you should and only go out when necessary then you should have nothing to worry about. Sorry but I don’t speculate on what I know nothing about and dislike when others do. Leave it to the professionals and live your life. TY!
If Biden becomes the President on Jan 20, I think Gov DeSantis will not go along with shutting things down. He has already said he is not going to lock down Florida again. Locking things down do not solve the problems. Deaths are way, way down from what they were earlier in the year. Most cases are minor or even without any symptoms. Gov DeSantis will continue to take care of the most vulnerable and let the rest of Florida live their lives.
“Tom, your optimism about steadily increasing numbers attending WDW doesn’t seem to include thoughts about the rapidly increasing COVID-19 numbers throughout the US, including Florida.”
I’m not optimistic about the near-term. I’ve said in a couple of articles that I think we’re in for a rough few months, but there’s light at the end of the tunnel come spring.
A lockdown in Florida seems highly unlikely for a variety of reasons. I also don’t anticipate a nationwide lockdown in the United States. By late January, I think it’s likely that the holiday gathering induced spikes will already be starting to decline (with new cases dropping, but perhaps not other metrics), and it seems doubtful there will be the public or political appetite for a lockdown at that point if numbers are trending downward.
Biden isn’t going to magically solve this problem. This is a very difficult to control disease. I currently live in a state with a democrat governor and have been under mask mandates and social distancing requirements and are numbers are still skyrocketing. So do I blame the democrats for my states numbers?
Trump pledged one billion dollars to Pfizer to make the vaccine. This administration also provided tons of ventilators and masks and other ppe to Healthcare facilities. I am a nurse. I have had my share of covid positive patients. I am not uneducated or uninformed.
I say all this to point out that Trump has done good and bad. Biden will do good and bad. We need to stop with all the polarizing commentary and work together. Disney will keep plugging along and we die hard fans will keep going.
Here we go… Biden who? Let’s wait until there’s actually an official result to talk about this guy or that guy. While it’s almost impossible to remove politics from these discussions due to the economic impacts of political decisions, I’m certain the company will do what is in its own best interest long-term. To me, that means staying open as much and as long as possible. Based on my personal experiences visiting the parks and reports such as Tom’s excellent blogging, it seems the parks are doing well and trending better. There is absolutely zero credibility linking parks to infections. Even IF more people are infected, treatments have gotten much better and death rates have decreased. A vaccine, if actually effective in the real world, can only help.
Excellent points, Beth!
I researched a dvc booking for president’s week in February and there was very limited availability for dvc resorts. Is that because more people are booking or because they haven’t increased the capacity for bookings yet for that time frame? Not sure if the answer here but reality was there wasn’t a lot to choose from already.
There is nothing to increase. DVC home resorts can be booked by owners at 11 months out. What you see is what is left after reservations have been made. Most owners are already booking next October. With all the points that were banked this year because of the resorts being closed, lots of member are booking anything they can to use their points.
Did you get any sense of whether 35% is going to be the capacity limit for the remainder of the year, or are they going to keep pushing it? I’m planning on watching how things go over Thanksgiving to make a final call on my Christmas reservation, but that will be pointless if capacity goes up even more by then.
I agree. If capacity is at 50% by Christmas week you can imagine the ride cues. With no fastpass it’s hard to imagine that this would be following 6 foot spacing guidelines. It might be ok if you bring back fastpass for a few of the big rides. I have a day booked for the weekend before Christmas. A rise in capacity doesn’t sit well with me.
I’ll forgive the fuzzy math comment, as we all know what’s fuzzy is people’s perceptions of what capacity is versus the actual, hard numbers set by fire codes. 35,000 people in the Magic Kingdom is a lot of people no matter how you slice it. With rides down or closed, shops and eateries closed and spaced lines, that equates to many folks in the walkways, making it seem a lot more crowded than it actually is.
The challenge seems to be that the company is heavily run by leaders who cut their teeth in the media section of the current Disney Company… my next sentance might not be popular, but, what we need is another CEO like Eisner (wait! did I just type that?), who loves the parks and wants to emulate Walt E Disney.
Wasn’t it Eisner & Frank that brought in Lee Cockerell? Lee’s incredible work at the resorts is all but gone at this point.
I’ve actually started thinking about trips to Japan, the Oriental Land Company seems to be the entity who gets “Disney”.
So, so sad.
Haha, so many Disney fans love to hate Michael Eisner. Bottom line is he did make some mistakes, everyone does. But he did save the company from being broken up not once, but twice! Without him, there likely wouldn’t be any Disney parks at all. While he skimped on custodial and some other things, there was some really great development going on because of his love for the parks.
Your last sentence is my concern as well. Was waiting for Tron at least and was hoping for the overhaul of future world before visiting again. If I do that I may be visiting in the next decade.
Fuzzy math is an understatement when saying 77 percent of rooms are full with resort after resort closed!
I can’t wait till Chapek is gone! As well as Iger!
They should have never restored pay fully to themselves while firing cast member and getting rid of long standing entertainment!
They looked at this virus as a way to cut things that they could never do in normal operating times but under the cover of covid they cut to the bone and 90 percent entertainment won’t return. I am afraid they have now further reduced the magic and what guests love about Disney!
“…90 percent entertainment won’t return.”
While I disagree with Disney’s decision to cut entertainment and think it was shortsighted, I also disagree with this analysis.
It was/is a temporary stop-gap. Disney realizes 35% of capacity and 77% booked is not profitable or a viable long-term solution. They know they need to spend money to make money.
With all the brokered DVC reservations sitting on websites looking for buyers, I’d bet a lot of occupancy is vacant DVC villas that couldn’t be resold.
That’s a good point about so many of those reservations sitting out there.
In general, DVC vacancy would not have any impact on hotel occupancy numbers since those are not hotel rooms. Same goes for the resorts that are currently closed. It’s only a percentage of available hotel rooms that are booked (meaning refurbishments occurring at operating resorts can also have an impact).