Disney About To Take a Staggering Financial Loss

Even an enormous entertainment empire like Walt Disney Studios can't escape every aspect of the economy, and it is starting to show.

By Charlene Badasie | Published


Entertainment powerhouses like Disney are really cashing in on the world’s need for escapism. But even the Kingdom of Mickey Mouse can’t completely break away from real life. Earlier this week, the company’s second-quarter financial results exceeded analysts’ expectations, with strong results in three key business areas – domestic theme parks, streaming, and television advertising. But financial bosses said the impact of Covid-19 is still being felt in their Asian theme parks.

In a statement via Deadline, Walt Disney’s Chief Financial Officer Christine McCarthy warned that the company could experience a $350 million loss from its Hong Kong and Shanghai theme parks. The predicted blow to these parks’ operating income this quarter has slightly tempered the division’s positive outlook. But it’s worth noting that some of Disney’s international parks haven’t been open full-time during the last quarter.

Paris Disneyland is celebrating its 30th anniversary, but parks in Shanghai and Hong Kong each experienced temporary closures due to spikes in local Covid cases. While the latter location reopened on April 21, Shanghai’s resort closed in late March and is still shuttered until further notice, CNBC reports. However, during the company’s earnings call with analysts, McCarthy said progress at the Paris theme park shows that things can improve in Asia too.

With Disney Paris’ first new Avengers Campus-themed offering set to open this summer (as part of an ongoing expansion) and strong demand at a large hotel called Marvel’s Avengers, the European location is preparing for a cash influx in the coming months. Speaking about these developments McCarthy said, “What we are seeing in Paris gives me hope [although] hope is not a strategy, that our parks in Asia will see that same rebound when their Covid-related headwinds abate.”

Meanwhile, investors were eager to see Disney’s subscription numbers for the second quarter since Netflix reported a financial hit in its most recent quarter. Fortunately, Disney added 7.9 million subscribers to its streaming service. The numbers were 52% above what analysts had projected. But the entertainment giant’s shares still fell more than 4% before the closing bell on Thursday. The stock news comes after shares hit a 52-week low of $104.79 the previous day.

The drop wasn’t completely unexpected since Disney’s share value has been slumping since the beginning of the year. In January the figure dropped by 30%, and more than 40% compared with the same time last year. CNBC explains that this is due to investors wondering if the company can sustain its streaming growth while questioning how increased inflation and a possible recession could impact its other business ventures.

Locally, Disney’s theme parks have shown signs of bouncing back from pandemic restrictions. Revenue for the company’s parks, experiences, and products segments more than doubled to about $6.7 billion during the second quarter, compared to the same period last year. According to the report, this growth was a result of increased attendance, hotel bookings, and cruise ship sailings. Higher ticket prices and higher spending on food, beverages, and merchandise also contributed.