DIS Walt Disney Co

By Erich Schwartzel and Allison Prang 

Walt Disney Co. typically reports its first-quarter earnings with news of a Christmas Day blockbuster performance at the box office, or a holiday surge in theme-park attendance. On Thursday, however, the company again demonstrated how Covid-19 has brutalized its bottom line.

Still, its quarter beat pessimistic Wall Street estimates, and Disney registered a profit of $17 million, or one cent a share. The blow came from Disney's legacy businesses: Two-thirds of North American movie theaters remain closed, and Disneyland is closed to anyone who isn't showing up for a Covid-19 vaccine shot.

In the comparable period a year ago, before the Covid-19 pandemic started to affect the U.S., its profit was $2.11 billion, or $1.16 a share.

Disney's first-quarter profit comes after the company reported two quarterly losses in a row. But in a sign of how much has changed at the world's largest entertainment company, Disney's quarterly profit was about 2% of the domestic box-office gross of the company's top-performing 2019 release, "Avengers: Endgame."

With the traditional movie business hurting, Bob Chapek, approaching his first anniversary as Disney's chief executive officer, reiterated the shift toward a streaming-first model.

"Our goal is to increasingly put the consumer in charge," said Mr. Chapek.

The company's flagship streaming service, Disney+, added more than 21 million new subscribers in the first quarter to hit 94.9 million subscribers as of Jan. 2, compared with 73.7 million subscribers at the end of the fourth quarter. The service launched in November 2019.

Disney remains a tale of two companies, and the quarterly performance underscored its high-stakes pivot toward the direct-to-consumer streaming business. Disney executives provided some details of what a post-Covid-19 company might look like now that vaccinations have begun and the reopening of theaters and parks is on the horizon. The company maintains that "Black Widow," a Marvel superhero movie scheduled to premiere in May, will get a theatrical release, and said mass vaccinations by April would be a game-changer for its struggling parks division.

All told, the Disney division that includes its theme-park business registered a $2.6 billion hit from Covid-19 in the quarter, the company said. Even when the parks open, Mr. Chapek said he expects social-distancing and mask-wearing to be required at least through the end of the year.

The pandemic has forced some hard decisions that might have once been considered heresy, said Mr. Chapek, citing a recent decision to discontinue a popular annual pass program at Disneyland that angered passionate fans. Other changes are on the way, he said.

"There's nothing like a pandemic to challenge the status quo," said Mr. Chapek.

Wall Street seems to have its eye on one figure: Disney+ subscribers. In December, Disney revised subscriber projections to reach as many as 260 million by 2024, a benchmark that sent its stock price soaring. Disney shares rose about 2% in after-hours trading on Thursday.

Within Disney, the streaming service has become a crucial arm of the company's franchise planning, since shows and movies that play at home slot into the narratives of the feature films. Disney's new Marvel Studios show, "WandaVision," for instance, includes clues to the larger Marvel cinematic universe.

In recent months, a new Pixar Animation movie, "Soul," and the second season of its breakout hit "The Mandalorian" have premiered on the service. They both provided new-programming options that boosted sign-ups.

The service has also allowed Disney to experiment with how it releases movies. In March, its coming animated feature, "Raya and the Last Dragon, " will be released on Disney+ as a premium-priced rental option.

Disney said its adjusted earnings were 32 cents a share. According to FactSet, Wall Street expected an adjusted loss of 34 cents a share.

Total revenue at Disney fell 22% to $16.25 billion, with revenue dropping in both the company's media and entertainment distribution and its parks, experiences and products segments. In the latter, revenue plummeted by more than half. According to FactSet, analysts were expecting total revenue of $15.9 billion.

Write to Erich Schwartzel at erich.schwartzel@wsj.com and Allison Prang at allison.prang@wsj.com

(END) Dow Jones Newswires

February 11, 2021 19:05 ET (00:05 GMT)

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