Disney is the latest company to say it will cut a lot of jobs. It said it will get rid of 7,000 jobs around the world.
As of October 1, Disney had about 220,000 employees, of which about 166,000 worked in the United States. About 3% of its global workforce, or 7,000 jobs, will be lost because of this.
“This is necessary to deal with the problems we’re facing right now, but I don’t make it lightly,” said CEO Bob Iger, who took over the company again in November after the board fired Bob Chapek. “I have a lot of respect and appreciation for the talent and hard work of our employees around the world, and I’m aware of how these changes will affect me personally.”
The job cuts are part of a plan to cut costs, which was also made public on Wednesday. Iger said that the company wants to save a total of $5.5 billion on costs. Of that amount, $2.5 billion will come from “non-content” operations like movies and TV shows.
The cuts come after the company said its finances were better than expected. Disney’s sales for the quarter went up 8% to $23.5 billion, which was a little more than the $23.4 billion that analysts polled by Refinitiv had predicted.
But earnings, even though they were a little lower than a year ago, blew away predictions and came in at 99 cents per share (without special items). That’s less than the $1.06 per share it made in the same way last year, but a lot more than the 78 cents per share that was predicted.
Iger also took steps to give back to shareholders, but the news that Disney will be cutting jobs will hurt employees.
During the pandemic, the company stopped giving out dividends. Iger said he expects that to come back.
“Now that the effects of the pandemic on our business are mostly over, we plan to ask the board to let us pay a dividend again by the end of the year,” he said. “This will be possible because of our plans to cut costs. Even though the return will be small at first, we hope to make it bigger over time.”
After-market trading for Disney shares went up by 8% after the company said it would cut costs and bring back the dividend. Disney stock lost 43% of its value in 2022, but since Iger’s return was announced in November, it has gained nearly 22%. This is much better than the market as a whole, but not as good as the gains at Netflix or Warner Bros. Discovery, which owns CNN.
In other financial news, Disney said that it lost more subscribers to its Disney+ streaming service in the last quarter than it did in the previous three-month period.
At the end of the quarter that ended October 1, the number of subscribers dropped by only 1%, from 164 million to 162 million. But the number of subscribers to its other streaming services, like ESPN+ and Hulu, where it has a stake, both went up by 2%.
This helped Disney cut its overall streaming losses to $1.1 billion in the quarter, down from $1.5 billion in the quarter that ended on October 1. However, this was still almost twice as much as the $593 million loss it reported a year earlier.
In recent quarters, Disney’s streaming services, especially Disney+, have seen both gains and losses in the number of subscribers.
People are cutting the cord on cable services that have paid Disney billions of dollars in subscriber fees over the past year. This makes it very important for Disney to have a streaming service that makes money. The company said again that Disney+ is still on track to be profitable in the next fiscal year, which runs from October 2023 to September 2024, but that could change if the economy gets worse.
This is the first quarterly report since the board fired the previous CEO, Chapek, and put Bob Iger in his place in November. Even though Iger has announced some changes, many investors were waiting for this quarter’s earnings report to find out more about Disney’s long-term strategy. Iger did say that he will combine all of the company’s media and content businesses around the world, including streaming, into a new division called Disney Entertainment. He said that the reorganization will help “bring creativity back to the center of the company.”
Iger said in the statement, “After a strong first quarter, we are starting a major transformation that will make the most of our world-class creative teams and our unmatched brands and franchises.” “We think that the work we’re doing to reshape our company around creativity while cutting costs will lead to steady growth and profits for our streaming business, make us better able to deal with future disruptions and problems in the global economy, and give our shareholders a good return on their investment.”
Streaming did better than expected, which helped the company report better-than-expected financial results, but the main drivers were strong movie ticket sales, led by “Avatar: The Way of Water,” and a jump in theme park revenue due to pent-up demand after a Covid-affected period a year earlier.