You'll probably never again see Walt Disney (NYSE: DIS) quite the way that investors saw the media giant in Monday afternoon's fiscal-third quarter report. Total revenue plummeted a brutal 42%, but the stock initially moved higher following the financial update. Disney barely posted a profit on an adjusted basis, but that exceeded expectations.
These are unusual times, and it was a highly unusual report out of the House of Mouse. Let's go over three things from the report that Disney isn't likely to repeat anytime soon.
1. Sports saved Disney's bottom line
Sports programming is typically a high-cost albatross around the neck of ESPN, but this time around it made a big difference in inflating Disney's blowout operating profit. There were no pro basketball or baseball games for ESPN to pay for -- and not a whole lot of cricket on Disney-owned Star in India -- but customers are still paying full rates.
Live sports aren't cheap, and this is what happens when the quarter's tab is light. The bad news for investors is that many of these games were simply bumped to the current quarter, so it's just a matter of shuffling overhead around. Viewers might also argue that they are owed a partial refund for the lack of sports programming on the costly networks earlier this year.
2. Mulan's Disney+ premium rental is a one-off
The biggest news out of Disney on Monday afternoon wasn't its financial update. Everyone knew that it would be a rough performance. Disney's biggest surprise was announcing that Mulan -- the live-action reboot of its 1998 animated classic -- will be available on Disney+ come Sept. 4. Unlike Onward, Artemis Fowl, and more recently Hamilton that were originally slated for theatrical releases, Mulan won't simply slide in as the next high-profile entry available int the Disney+ catalog at no additional cost. Subscribers will have to pay $29.99 for a digital rental of the film.
Disney emphasized that this is a "one-off" given the unique situation. Onward had already started its multiplex release before the COVID-19 interruption. Artemis Fowl wasn't generating a lot of buzz. Hamilton will probably still work at a theater release in the future. Mulan is a hype-saddled flick that already had its release date bumped a couple of times. We don't know when movie theaters will truly reopen, and it only made sense for Disney to act sooner rather than later before the buzz went away.
Disney only anticipates doing this once. But don't be surprised if the "one-off" act happens again with other prolific releases.
3. Theme parks division revenue falls 85%
Disney's hardest hit segment was its theme parks business. Disney's parks, experiences, and products segment plummeted 85%, and this is with most of its gated attractions closed until the final few weeks of the reporting period. Shangahi Disneyland opened in mid-June, followed later in the month by the since reshuttered Hong Kong Disneyland.
Things should get better from here on the theme park front. Many of Disney's remaining resorts reopened in July. The attractions are not operating profitably right now, but at least Disney is losing less money than it would have if the parks were closed.
The fiscal third quarter was unique. We'll find out soon if the media giant knows what to do when it stands out in a crowd.
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Rick Munarriz owns shares of Walt Disney. The Motley Fool owns shares of and recommends Walt Disney and recommends the following options: long January 2021 $60 calls on Walt Disney and short October 2020 $125 calls on Walt Disney. The Motley Fool has a disclosure policy.
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