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UPDATE 4-Disney returns to profit as streaming success offsets pandemic-hit parks

Lisa Richwine and Munsif Vengattil
·3 min read
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(Adds comments from conference call)

By Lisa Richwine and Munsif Vengattil

Feb 11 (Reuters) - Walt Disney Co swung to asurprise quarterly profit on Thursday, as "The Mandalorian" and"Soul" lifted its fast-growing streaming business, outweighingpandemic worries about its hobbled theme park operations.

Investors overlooked a 53% decline in park revenue in thequarter and welcomed Disney+ streaming reaching 94.9 millionsubscribers. Shares rose 3.1% to $194 after they closed at anall-time high in regular trade.

The "Star Wars"-inspired "Mandalorian" series and Pixar'sanimated "Soul" movie helped position the year-old Disney+ as acredible threat to the dominance of Netflix Inc in thestreaming video wars.

Including Hulu and ESPN+, Disney's paid streaming membershiptopped 146 million.

"Disney+ has been a massive success and is a testament toDisney's brand equity and expertise in storytelling," eMarketeranalyst Eric Haggstrom said. "This has been one of the mostsuccessful consumer product launches in recent memory."

The company posted earnings of 32 cents per share forOctober through December. Wall Street had expected a loss of 41cents per share, according to the average forecast of analystssurveyed by Refinitiv.

Quarterly revenue fell to $16.25 billion from $20.88 billiona year earlier, but was still above analysts' average estimateof about $15.93 billion, according to IBES data from Refinitiv.

During the pandemic "we have made significant changes whilefinding new and innovative ways to conduct our businesses,"Chief Executive Bob Chapek said on a conference call withanalysts. "But at the same time, we have chartered a course foran even more deliberate and aggressive (streaming) push."

As the coronavirus pandemic drags on, Disney's theme parksin California, Hong Kong and Paris remain closed and others havelimited attendance to allow for social distancing. The companyexpects Disneyland in California and Disney Paris to remainclosed through March and hopes its park in Hong Kong can reopensometime before April, Chief Financial Officer ChristineMcCarthy said.

The movie studio has delayed several major releases as manytheaters remain shut. While the company has moved some films tostreaming, Chapek said Disney still plans for Marvel actionmovie "Black Widow" to be released in theaters. The filmstarring Scarlett Johansson is currently scheduled to debut May7.

The media and entertainment distribution unit, whichincludes streaming, the movie studio and traditional TVnetworks, reported operating income of $1.5 billion, a 2%decline from a year earlier.

At the parks and consumer products division, operating lossfrom the parks and consumer products business hit $119 million,compared with a profit of $2.52 billion a year earlier.

The closures and reduced operations cost about $2.6 billion,Disney estimated.

Looking ahead, the company said it expected costs to complywith government regulations and to implement safety measures atparks and in TV and film production to reach $1 billion infiscal 2021.

The direct-to-consumer segment, which houses Disney+,reported an operating loss of $466 million, compared with anoperating loss of $1.11 billion in the year-earlier quarter.(Reporting by Lisa Richwine in Los Angeles and Munsif Vengattilin Bengaluru; Editing by Anil D'Silva and Lisa Shumaker)