Walt Disney Co. (NYSE: DIS) intends to trim employee count by 32,000 in the first half of FY 2021 as the world’s leading producers of entertainment face many issues in continuing its business operations against the backdrop of the COVID-19 pandemic. The news did not go well with the market, which slammed the stock to $149.09, reflecting a loss of $2.40 or 1.58% from the prior close.
In a filing with the SEC (Securities and Exchange Commission), the Burbank, California-based media company has stated that the anticipated layoffs will be mainly at Parks, Products, and Experiences.
Furthermore, as per October 3 data, roughly 37,000 staff members are on leave due to the impact of COVID-19 on its business operations. The employees on leave are not part of the announced layoff.
Disney clarified that the decision mentioned above was made based on the prevailing business scenario, including the impact of COVID-19 and the fluctuating business atmosphere. According to the company, the decision was taken to improve staff’s efficiency, including the enforcement of limitations in hiring for crucial business positions.
Back in September, the company had revealed its intention to lay off 28,000 of its theme park employees in the US, underlining a reduction in park capacity due to social distancing measures and also California’s “unwillingness to lift restrictions that would allow Disneyland to reopen.”
The company further stated that the action would impact roughly 67% of part-time staff. In mid-March, Disneyland in California was shut down. Earlier in November, the company stated that it was furloughing additional employees in the South California theme park. There is no clarity over when the state will allow the reopening of theme parks.
Along with theme parks outside the US, Disney World in Florida closed in March and was reopened in mid-July. However, to ensure visitors’ protection (health and safety), the overall visitor capacity was reduced.
Of late, in France, the enterprise was cornered to shutdown Disneyland Paris once again, following fresh enforcement of lockdown to contain the second wave of COVID-19. Nevertheless, Disney theme parks in Shanghai, Tokyo, and Hong Kong remain open.
Interestingly, pointing out the noteworthy accomplishment of Disney+, which offers subscription-based streaming of films and television programs. The company stated that it now intends to roll out a general recreation-focused direct-to-consumer (DTC) based streaming service offered under the Star brand outside the US by next year.
Back in October, Disney started reorganizing its media and entertainment divisions to expedite its DTC plan.
The news of layoff is expected to keep the stock range-bound with bearish bias in the short-term.
The historical price indicates that the stochastics oscillator has formed a negative divergence with the price. This confirms the weakness in the stock. Furthermore, the next support is expected only in the 125-130 range. Therefore, we are anticipating the decline to continue in the days ahead.
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