Even though the Disney park in Shanghai in China has been able to reopen, all of its other amusement parks all around the world still remains shut because of the coronavirus pandemic. According to analysts, the company could be facing loss of earnings of as much as $1 billion before interest and taxes every month because of its still closed down parks in other parts of the world.
During the second quarter, its parks, cruises and stores were forced to shutter down because of the coronavirus which resulted in the company taking a $1 billion hit in revenue from its businesses of its parks, experiences and consumer products segment, the company had announced earlier this month. That loss amount formed the basis for analysts to calculate the forecast of the future losses of the company the third quarter and beyond.
“We intend to continue doing work to refine this estimate, but we don’t have much to go on,” Todd Juenger, analyst at Bernstein, wrote in a research note Wednesday. “Disney did not provide nearly as much information as we had hoped with respect to the burn rate of Parks while they are closed, or the economics of opening at reduced capacity.”
During the second quarter, while domestic parks, Paris Disneyland and Tokyo Disneyland were only closed for a few weeks, the Shanghai Disneyland was closed for more than half of the quarter.
During the second quarter however, except for the Shanghai Disneyland which was reopened on May 11 with reduced capacity, all the other parks still remain closed. The financial impact of running the park with fewer guests in attendance is something that is hard to sasses at the moment, Juenger said. The company currently is only allowing about 30 per cent of the generally full capacity of the park.
One the other hand, the company is trying to save on costs in some other parts of the world as many employees of its parks were furloughed in mid-April and salary reductions were imposed for executives, the company had said.
“Balancing the offsets, for now we estimate the approximate monthly impact on [earnings before interest and taxes] will remain in the $1 billion range,” Juenger wrote.
It is also likely that lesser number of people will be allowed inside of its parks for some time when Disney reopens its other parks. It is expected that the Disneyland and Walt Disney World will have to function and operate at a capacity of less than half.
But when it comes to Disney, his firm remains “unconcerned about liquidity, refinancing, or even covenants,” despite these headwinds, Juenger said. “To extent Disney trips any financial covenants, we are quite confident the banks would grant them an exception,” he wrote.
Almost $11 billion in an offering of senior notes was raised by Disney this week.
(Adapted from CNBC.com)