Disney reports $1bn COVID-19 reduction in operating income in Q2

The Walt Disney Company has released its 2020 Q2 results and estimates that it has lost around $1bn in operating income in the quarter.

The second quarter ended on 28 March 2020. The report said that the most significant area of the company to be affected by COVID-19 is its Parks, Experiences and Products segment. This is due to the closure of all Disney theme parks, suspended cruise ship sailings and closure of retail stores around the world.

‘Financial impact’ on the company

The Park segment’s operating income fell by 58% to $639 million in Q2. “We estimate the COVID-19 impact on operating income at our Parks, Experiences and Products segment was approximately $1.0 billion primarily due to revenue lost as a result of the closures” said the report.

The report did say that before these forced closures, “volumes and guest spending were higher compared to the prior-year quarter.”

Costs for the quarter were also higher compared to the prior-year quarter. This was due to expenses for “new guest offerings” like Star Wars: Galaxy’s Edge.  Furthermore, there were higher costs for the pay of employees who were not working due to the pandemic.

“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,” said Bob Chapek, CEO of The Walt Disney Company in the report.

Furlough of staff

When the domestic Disney theme parks closed in March, cast members were placed on full pay until 18 April. However, in late April, Disney announced that it was going to furlough 100,000 workers, which is about half of Disney’s theme park and resort workforce.

This was expected to save the company around $500 million a month in salaries. 17,000 staff at Disneyland Paris were also put onto France’s furlough scheme, on which the government pays up to 84 per cent of their net salary.

Reopening Disney theme parks

We do not currently know when the US Disney theme parks will be able to reopen. The San Diego Tourism Authority released an attractions re-opening plan that would allow California attractions like Disneyland to reopen in ‘months’ if certain precautions were put into place.

Meanwhile, Florida’s reopen task force has released its initial guidelines for reopening the state’s theme parks, with precautions such as limited capacity and social distancing measures.

Shanghai Disneyland is set to reopen with safety precautions in place on 11 May. It will be the first Disney theme park to reopen in the world.