Walt Disney Co. reported fiscal fourth-quarter loss on Thursday thanks largely to changes related to the COVID-19 pandemic. Its earnings were dragged by costs from restructuring related to its streaming services and lost revenue from its California theme parks, which remain closed amid surging coronavirus cases in the U.S.
But its results weren't as bad as feared and the company's shares advanced after hours.
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Before the pandemic, Disney's profit soared as its wide array of media and entertainment offerings, from Marvel theatrical releases to Disney cruises, outperformed. But those businesses have been among the hardest hit during a pandemic that shows no sign of going away.
Even before the pandemic, Disney had been increasingly focused on its streaming services such as Disney Plus, which launched a year ago and now boasts 73.7 million subscribers, surpassing analysts' and the company's own expectations. That move has been vastly sped up by the pandemic, as well as increasing competition from new streaming services such as NBCUniversal’s Peacock and WarnerMedia’s HBO Max, not to mention older rivals like Netflix.
In October, Disney announced a restructuring of its business units to put streaming front and center. It created three content arms, one each for sports, general entertainment and its studios, which have famous brands including Star Wars and Marvel. Their primary focus is on making shows and movies for streaming services. Meanwhile, a new distribution group will centralize how the content is sold and oversee streaming operations.
Disney Plus has boomed during the pandemic. Subscribers to Disney's main streaming bundle — Disney Plus, ESPN Plus and Hulu — top 120 million. It still plans to launch another international streaming service called Star. Disney has also been pivoting to releasing major titles on streaming services that would traditionally have appeared at cinemas, like a live-action remake of “Mulan” and the upcoming Pixar film “Soul,” which will hit Disney Plus at Christmas.
Disney posted a loss of $629 million, or 39 cents per share, in the three months that ended Oct. 3. That's a swing from earnings of $1.21 billion, or 58 cents per share, a year earlier. Analysts expected a loss of 73 cents per share, according to FactSet.
Revenue fell 23% to $14.71 billion. Analysts expected revenue of $14.15 billion.
To offset the cost of shuttered parks, the company is laying off some staff. In September, Disney said it was laying off 28,000 staffers at its parks in California and Florida due to limits on attendance and other pandemic-related issues. Two-thirds of the planned layoffs involve part-time workers, although salaried employees and hourly workers were both affected.
Disney said revenue at its parks, experiences and products business fell 61% to $2.6 billion. But it wasn't just parks that suffered. The company said it has suffered “significant disruption” in the production and availability of programming material — including the shift of live sports from the third into the fourth quarter and beyond. The pandemic has also led to the suspension of TV and movie production, though some of that has resumed in the current quarter.
Shares of the Burbank, California-based company rose $4.48, or 3.3%, to $140 in after-hours trading. The stock had closed down less than 2% at $135.52.