Disney to take $175 million hit from the coronavirus outbreak

Visitors wearing masks walk past Shanghai Disney Resort, that will be closed following the outbreak of a new coronavirus, in China.

Aly Song | Reuters

Disney said it is expecting to take a $175 million hit from the recent coronavirus outbreak if its Hong Kong and Shanghai Disney parks remain closed for two months.

“The current closure is taking place during the quarter in which we typically see strong attendance and occupancy levels due to the timing of the Chinese New Year holiday,” Christine McCarthy, chief financial officer at Disney, said during an earnings call Tuesday. “The precise magnitude of the financial impact is highly dependent on the duration of the closures and how quickly we can resume normal operations.”

McCarthy said the company expects an impact of $135 million on second-quarter operating income from the Shanghai park and about $40 million from the closure of the Hong Kong park.

The company had already disclosed that its Hong Kong park had been underperforming due to protests in the region. Between coronavirus and the unrest in Hong Kong, operating income at the park is expected to decline by $145 million in the second quarter.

Last quarter, operating income in the Hong Kong park declined by $55 million.

Domestically, the company doesn’t expect traffic at its U.S.-based parks to be impacted by lower visitation of guests from Asia.

McCarthy said that the Asian market is not as prevalent in terms of visitation to the domestic parks compared to countries like Canada, Mexico, Austrailia and the United Kingdom.

Lower results at its international parks and resorts hurt its fiscal first quarter performance, but was offset by strong growth at its domestic business. In the U.S., the opening of new parks and attractions, including the Star Wars: Galaxy’s Edge park and the Rise of the Resistance ride, provided a boost.

Revenue at Disney’s Parks, Experience and Products segment rose 8% from the prior year to $7.4 billion, while operating income increased 9% to $2.3 billion.

Iger said on the call that Rise of the Resistance has “done extremely well” in terms of attendance and higher guest spending.

—CNBC’s Annie Palmer contributed to this report. 

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