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The most important line from Disney CEO Bob Iger's return memo: Morning Brief

This article first appeared in the Morning Brief. Get the Morning Brief sent directly to your inbox every Monday to Friday by 6:30 a.m. ET. Subscribe

Tuesday, November 22, 2022

Today's newsletter is by Myles Udland, senior markets editor at Yahoo Finance. Follow him on Twitter @MylesUdland and on LinkedIn. Read this and more market news on the go with Yahoo Finance App.

Disney (DIS) shocked the business world late Sunday night when the company announced former longtime CEO Bob Iger would return in the same role, effective immediately.

Iger replaces Bob Chapek, who took over the CEO reins from Iger in late February 2020 and awarded a contract extension by the board just five months ago.

Disney stock rose 6% on Monday, and Wall Street analysts were broadly positive on the move.

But one sentence from the company's press release announcing the decision stands out as a clear signal this return by Iger doesn't come without some terms and conditions.

Conditions, it seems, which were not met during his first tenure.

"Mr. Iger... has agreed to serve as Disney’s CEO for two years, with a mandate from the Board to set the strategic direction for renewed growth and to work closely with the Board in developing a successor to lead the Company at the completion of his term," the statement read. (Emphasis ours.)

In other words: Bob, you can't leave us without a good plan the second time around. A memo from the board to Iger, sure, but also a message from the board back to itself.

LOS ANGELES, CALIFORNIA - NOVEMBER 18:  Disney Executive Chairman Bob Iger attends the Exclusive 100-Minute Sneak Peek of Peter Jackson's The Beatles: Get Back at El Capitan Theatre on November 18, 2021 in Hollywood, California. (Photo by Charley Gallay/Getty Images for Disney)
Disney Executive Chairman Bob Iger attends the Exclusive 100-Minute Sneak Peek of Peter Jackson's The Beatles: Get Back at El Capitan Theatre on November 18, 2021 in Hollywood, California. (Photo by Charley Gallay/Getty Images for Disney)

There is little doubt that circumstances outside Chapek's control shaped what became an ill-fated tenure leading the world's foremost entertainment brand.

The Covid-19 pandemic brought the global economy to a halt just days after Chapek's time at the helm began on February 26, 2020. Two-plus years of consistent media appearances and the publishing of a best-selling book by Iger also didn't help Chapek's efforts to escape the shadow of his former boss.

And though some experts don't see Iger's return as a complete surprise, subsequent reporting suggests his re-hire came during a frantic process for the company's board following a disappointing earnings report earlier this month.

That process resulted in Disney essentially hitting the reset button on the last several years of its corporate journey.

Even with a rally on Monday, Disney shares are still trading at roughly the same level as where they ended 2014. The success of Disney's Marvel acquisition, the popularity of its Disney+ streaming service, and the continued reverence from consumers and creators have not resulted in outsized returns for shareholders.

Through Friday's close, Disney stock was down about 19% during Bob Chapek's tenure; over that same period, the S&P 500 was up about 34%.

"Given Iger's track record and experience at the company and industry, we believe this announcement will be well received by investors," Bank of America analyst Jessica Ehrlich wrote in a note to clients on Monday. So far so good, at least through Day 1.

"However," Ehrlich adds, "we now expect Iger to fully re-evaluate several of the recent strategic initiatives and corporate restructurings over the past two years, which could create some near-term uncertainty on direction of the company."

A direction that begins with Disney taking a few steps back in time.

What to Watch Today

Economy

  • 10:00 a.m. ET: Richmond Fed Manufacturing Activity Index, November (-8 expected, -10 during prior month)

Earnings

  • Best Buy (BBY), HP (HPQ), Abercrombie & Fitch (ANF), American Eagle Outfitters (AEO), Analog Devices (ADI), Autodesk (ADSK), Baidu (BIDU), Burlington Storess (BURL), Canadian Solar (CSIQ), Dick's Sporting Goods (DKS), Dollar Tree (DLTR), Guess? (GES), Jack In The Box (JACK), Medtronic (MDT), Nordstrom (JWN), Vipshop (VIPS), VMware (VMW), Warner Music Group (WMG)

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