Disney Faces First Annual Loss in Four Decades, But The Losses Were Less Than Expected

Walt Disney Company Stock Dropping

With Disney’s latest 2020 Annual and Final Quarterly report they showed a fourth-quarter loss of $710 million. For 2020 they had a net loss of $2.83 billion. But of course they likely owe a lot more money since they borrowed billions of dollars to reach this outcome.

Disney has not had an annual loss like this since 1980 and they haven’t had two back-to-back quarterly losses since 1996.

In surprise to no one, COVID-19 shut-downs have hit the Walt Disney Company very hard. Currently Disneyland is still closed down, as are Adventures by Disney and Disney Cruise Lines.

After adjustments the company reported a loss of .20 a share. Last year they were at $1.07 per share earnings. Quarterly revenue dropped over $4 billion to $14.71 billion compared to the $19.1 billion in the 4th Quarter 2020.

What we have learned in the investor call:

At least the parks were open for the final quarter after being down for the third quarter. They indicated that all the parks operated at a gain and not a loss due to attendance caps. Sales in the Parks division were at $2.58 billion, which is down from the $6.66 billion seen a year ago. But this was better than what was expected at the estimated $2.23 billion.

Disney is encouraged by the fact that the resort bookings are already at 77% for First Quarter and Thanksgiving week is already hitting capacity at Walt Disney World.

Disney CEO, Bob Chapek, discussed how they are setting up the company for success moving forward and taking care of Cast Members. Tell that to all the ones that are laid-off.

Chapek discussed the one bright spot they had which was the 73.7 Million paid subscribers to Disney+ on it’s one year anniversary.

The real bright spot has been our direct-to-consumer business, which is key to the future of our company, and on this anniversary of the launch of Disney+ we’re pleased to report that, as of the end of the fourth quarter, the service had more than 73 million paid subscribers — far surpassing our expectations in just its first year.

He then talked about how ESPN+ and Hulu have increases as well as Disney+. The commonality between all of these is the free package of the three channels provided by a partnership with Verizon.

They have Disney+ launching on Friday in Brazil, Mexico, Chile, and Argentina. And During the upcoming December 10th Investor Day they plan on discussing more of their Disney+ and Direct-to-Consumer plans. That’s when they will update subscriber numbers as well.

Due to all of this Disney is not paying dividends for January 2021.

The Walt Disney Company expects more losses in 2021 due to the lack of theatrical releases, low confidence in consumer travel and lack of live sports.

They expect Disneyland to remain closed through at least the end of the Q1 fiscal quarter.  Due to their lack of theaters they anticipate their theatrical division to take a hit in Q1 and they also expect merchandise sales to take a loss in Q1.

Basically they kept promoting their Investor Day on December 10th.

When it opened up to questions there were a lot of questions regarding the future of the franchises Disney owns and the issue of quality vs quantity as well as the way they released the films to “Premier Access.”  Given the way Chapek talked we can expect content to be churned out because more new content equates to more subscribers. So quantity over quality is what we will likely see.

In regards to titles like Mulan we will likely see more “Premier Access” moving forward. “…There will be a role for it strategically…and we will talk more about it in the Investor Call in December.”

We also learned that parks will be bumped to 35% capacity. Which is not a surprise given how many times they keep offering more Park Pass availability.

What do you think? Comment and let us know.

Source: Disney Investor call, Marketwatch

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