Disney said around 28,000 people will be affected by the decision, most of them part-time workers, following the closure of theme parks in California, and limited capacity elsewhere as a result of the global coronavirus pandemic. Third quarter revenues for the division, in fact, fell 85% from last year owing to the shutdowns.
“For the last several months, our management team has worked tirelessly to avoid having to separate anyone from the company," Disney's parks unit chairman Josh D'Amaro said in a letter to employees. "We’ve cut expenses, suspended capital projects, furloughed our cast members while still paying benefits, and modified our operations to run as efficiently as possible, however, we simply cannot responsibly stay fully staffed while operating at such limited capacity.”
Disney shares were marked 2.2% lower in pre-market trading Wednesday to indicate an opening bell price of $122.61 each., a move that would still leave the stock with a six-month gain of around 27%.
While theme parks have been a drag on Disney's top and bottom line for much of the year, its Disney+ streaming service continues to impress, with reports suggesting the premium 'video-on-demand' release of Mulan, a live action film based on the legend of a fifth century female Chinese warrior, has generated nearly $300 million in direct-to-consumer revenues since is September 4 release.
Analysts at Credit Suisse, however, suggest Disney needs around $440 million in sales to its Disney+ customers in order to recoup the predicted box office tally of the film, which was pulled from theatres during the peak of the coronavirus outbreak.
"Given the initial demand for the Disney+ subscription service these first few quarters post-launch and the dearth of theatrical content since the COVID-19 crisis began, we believe it is reasonable to expect a healthy number of Disney+ homes (9+m) will purchase Mulan despite a materially higher price point than previous PVOD releases, and this experiment will prove an important proof point for Disney’s direct-to-consumer strategy," Credit Suisse's Douglas Mitchelson wrote in a recent note to clients.
Disney will publish its fiscal fourth quarter earnings, which includes the month of September, on Thursday November 5.