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Disney could take a $280 million hit from its Chinese parks because of the coronavirus and protests

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Disney has warned that profits from its parks in China could drop by $280 million in the current quarter, due to shutdowns caused by the coronavirus and a loss of business related to recent mass protests in Hong Kong.

The company warned of the potential hit to park profit during its earnings call Tuesday, adding that the coronavirus will hurt its results for the quarter through March and the fiscal year as a whole.

Disney suspended operations at some of its facilities in China last month in response to the ongoing public health crisis, which has killed nearly 500 people and infected more than 24,500 — mostly in mainland China.

For now, the properties in Hong Kong and Shanghai are closed indefinitely, and “the precise magnitude of the financial impact is highly dependent on the duration of the closures,” Chief Financial Officer Christine McCarthy said.

Operating income at the company’s Shanghai park could drop by about $135 million this quarter if the park remains closed for two months, she added.

The Hong Kong park, which has long struggled to gain traction, was already suffering from the drop in tourism because of mass protests that gripped the city in the second half of 2019. Between the protests and the virus, the Hong Kong park could lose roughly $145 million in operating income over the quarter, McCarthy said.

The virus outbreak in China struck at a particularly bad time for businesses. The country recently celebrated its biggest holiday, the Lunar New Year, which is typically a boon for the entertainment and travel sectors as most Chinese residents enjoy a week off. This year, many companies are missing out on the boom that the holiday usually brings.

McCarthy said that this period is normally rewarding for Disney, with “strong attendance and occupancy levels.”

Earnings from Disney’s Shanghai park had become especially important. Prior to the outbreak, attendance there had been growing, which was helping offset poor performance at the Hong Kong resort, the company said.

The events in China dampened an otherwise strong quarter for Disney. The company posted earnings Tuesday that were in line with expectations, and it also impressed analysts with more subscribers than expected for its new streaming service, Disney+.

Article Topic Follows: Biz/Tech

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