The Walt Disney Company Issues Cautiously Optimistic Earnings Report for Quarter Ending March 31

Disney Issues Cautiously Optimistic Earnings Report The DIS TWDC-logo

Tuesday afternoon, The Walt Disney Company released their earnings report for the 2nd fiscal quarter of 2020 (ending March 31, 2020), showing revenue up 21%, but income down 37% over last year for the quarter. Diluted earnings per share decreased 63%.

Chief Executive Officer Bob Chapek said in a written statement:

While the COVID-19 pandemic has had an appreciable financial impact on a number of our businesses, we are confident in our ability to withstand this disruption and emerge from it in a strong position. Disney has repeatedly shown that it is exceptionally resilient, bolstered by the quality of our storytelling and the strong affinity consumers have for our brands, which is evident in the extraordinary response to Disney+ since its launch last November.

During the earnings call that followed the release of the report, Chapek was joined by Chairman Bob Iger and Chief Financial Officer Christine McCarthy. All three executives spoke remotely from their homes.

Regarding the current global situation, Iger said that while the challenges being faced are unprecedented, he had absolute confidence in Disney’s ability to weather the storm. Adding that Disney’s collection of assets has never been more necessary or more important, also commenting on the strength of the brand and its emotional connection.

Chapek followed up on his written statement saying that the direct-to-consumer segment will be the key to Disney’s growth, with Disney+ exceeding expectations and now boasting 54 million subscribers globally.

Chapek called Disney an “exceptionally resilient company.”

McCarthy added that despite the challenges, Disney starts from a position of relative strength, however they will not be issuing a dividend for the first half of 2020 and have reduced capital spending by pausing construction and refurbishment work.

She added that prior to the closure, all parks (except Honk Kong) were trending ahead of last year.

McCarthy said the impact of the COVID-19 pandemic could be as much as $1.4 billion for the quarter, with $1 billion of that in the Parks & Resorts division. She broke that down further, adding that half of the $1 billion Parks impact is from the domestic parks, while the other half is from international parks and Disney Cruise Line.


  • Shanghai Disneyland theme park will begin a controlled opening on May 11. Read more here.
  • Disney+ will expand to Japan in June and more areas of Europe in September, plus Latin America later in the year.


  • When asked about park capacity and profitability when they reopen, Chapek said that every location will be different, but Disney would not reopen the parks unless they will make a positive contribution to the bottom line. A follow-up question was asked about staffing levels, and while Chapek didn’t address the question directly, he said commented that no matter what the percentage of capacity they open domestic parks with, they will be maxed out due to pent up demand of fans. Chapek said that parks will be staffed accordingly.
  • When asked to comment on Disney Cruise Line, Chapek commented that the return is still months away and that it will probably be the last thing to come back online. He added that guests will return and felt that Disney Cruise Line would be more resilient that their competitors, just because of the faith in the Disney name. Following up, McCarthy said that Disney Cruise Line is a relatively small percentage of the Parks & Resorts division, but there is still a nice return on investment and it is a long term value for shareholders.
  • Chapek was asked about contingency plans for other parks when they reopen and who will be allowed in, to which he replied that at Shanghai they will be using dated tickets, but that might not necessarily be the case at the other parks.
  • Moving to Disney+, Chapek was asked about expanding content and coverage quicker because more people are at home. He replied that while they are thrilled with the response, they will continue to make their planned investments. McCarthy added that Disney+ is continuing to expand into new markets.
  • On the studio side, Chapek was asked when he thought production would resume. Chapek had no projections, but said that, as with the parks, they will be very responsible.
  • Following up, he was asked if the time between theater and home video or streaming will be changing. Chapek said that there may have to be adjustments, but they will be done on a case-by-case basis.
  • As far as the profitability of films when they are released in theaters, Chapek said that his fingers are crossed and they are waiting to see what happens with other studios’ films that are released prior to Mulan on July 24th.

Overall Earnings

Diluted earnings per share were down 63% from last year’s 2nd quarter, from $1.61 to $0.60. Revenues for the company were up 21% compared to last last year, from $14.922 billion to $18.009 billion for the quarter. Operating income decreased 37% from $3.816 billion to $2.416 billion for the 2nd quarter.

  • Parks, Experiences, and Consumer Products: 10% decrease in revenues and 58% drop in operating income for the 2nd quarter
  • Direct-to-Consumer and International: 260% growth in revenues and 111% decrease in operating income for the 2nd quarter
  • Media Networks: 28% growth in revenues and 7% increase in operating income for the 2nd quarter
  • Studio Entertainment: 18% growth in revenues and 8% decline in operating income for the 2nd quarter
  • 21st Century Fox: This is the fourth quarter numbers have been reported, so there is no comparison to last year

Parks, Experiences, and Consumer Products

Compared to last year’s 2Q, Parks, Experiences, and Consumer Products saw decline of 10% in revenues, from $6.171 billion to $5.543 billion. For the quarter there was a 58% drop in segment operating income compared to last year’s 2nd quarter, from $1.506 billion to $639 million.

Asian parks were closed much of the quarter and remaining parks and Disney Cruise Line closed mid-March, causing a estimated $1 billion loss of operating income. Costs were also higher due to expenses related to new guests offerings and payroll for employees that were not working.

Merchandise sales were lower, with the prior year benefiting from Avengers and Mickey’s 90th birthday merchandise.

Direct-to-Consumer and International

The Direct-to-Consumer and International division saw revenue growth of 260% for this quarter over last year, from $1.145 billion to $4.423 billion. Operating income loss increased 111%, from a loss of $385 million to a loss of $812 million.

In addition to the over 33 million Disney+ subscribers at the end of the quarter, paid subscribers at ESPN+ jumped 259% over last year and Hulu was up 24%.

Operating income was affected by the costs associated with the lauch of Disney+ and the consolidation of Hulu.

Media Networks

The Media Networks division brought in $7.257 billion in revenues this quarter compared to $5.683 billion last year, a gain of 28% over 2019’s second quarter. Segment operating income for the division’s Q2 increased 7% over last year — $2.230 billion up from $2.375 billion.

At the cable networks, ESPN saw higher programming and production costs, but lower advertising revenue. Disney Channel saw an increase in market costs and a decrease in affiliate revenue. Freeform faced higher programming costs, lower ad revenue, and higher marketing costs.

Broadcasting fared better with higher affiliate revenue and lower production costs.

Studio Entertainment

Revenue at Studio Entertainment was up 18% compared to this quarter last year, from $2.157 billion to $2.539 billion. Operating income declined 8%, from $506 million to $406 million for the quarter compared to last year.

The smaller than usual gains were due to theaters operating at controlled capacity and then being closed, which impacted Onward significantly. Frozen II and Star Wars: The Rise of Skywalker also brought in ticket sales during the quarter, compared with Captain Marvel, Mary Poppins Returns, and Dumbo last year.

Source: The Walt Disney Company

Tom is the host and producer of the DIS Unplugged: Disneyland Edition podcast, plus Disneyland Editor of The DIS. He enjoys traveling with his wife and teenage son. At this point, their favorite destination is Alaska, with a FIFTH cruise there planned for the Summer of 2019. In his spare time he volunteers with Boy Scouts and Cub Scouts, and help found his son's former Cub Scout Pack. His favorite Disneyland attraction is Space Mountain.


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