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Hong Kong protests

Protests set to cut $275m from Hong Kong Disneyland earnings

Theme park's woes add to struggles faced by hotels, tour operators and retailers

Disney's profit warning comes a week after the Hong Kong government said its economy slid into recession for the first time in a decade, hurt by five months of increasingly violent protests and the U.S.-China trade war.   © Reuters

HONG KONG -- Walt Disney Co. said that continued anti-government protests in Hong Kong could drag full-year earnings at the local Disneyland theme park by $275 million.

Operating income at Hong Kong Disneyland fell $55 million in the fiscal fourth-quarter ended Sept. 30, Chief Financial Officer Christine McCarthy said in a call with investors after the company released annual earnings.

The U.S.-based company expects operating income at the Hong Kong park to fall $80 million in the current quarter, and could take its decline for the full fiscal year ending September 2020 to $275 million if the political unrest continues, McCarthy said.

The protests "have led to a significant decrease in tourism from China and other parts of Asia," she said.

Disney's warning comes a week after the Hong Kong government said its economy slid into recession for the first time in a decade, hurt by five months of increasingly violent protests and the U.S.-China trade war. The political unrest has scared away tourists from the city, which in turn has battered hotel occupancy rates and retail sales.

The protests could extend Hong Kong Disneyland's losses to five consecutive years. The theme park in February said its net loss for the fiscal year ending September 2018 narrowed to HK$54 million ($6.9 million) from HK$345 million a year earlier.   © Reuters

Despite the struggles in Hong Kong, Disney said its international parks and resorts managed to match the previous year's earnings, as operating income rose at resorts in Paris and Shanghai. Disney said attendance in Shanghai had dropped but was more than offset by higher average ticket prices.

The company on Thursday reported better-than-expected results helped by its theme parks and this year's remake of the "Lion King" movie. Excluding certain items, the company earned $1.07 per share in the quarter, well above the consensus estimate of 95 cents a share.

Disney is the latest company to reveal the extent of the hit from sometimes violent clashes in Hong Kong, which show little sign of abating.

Cathay Pacific Airways, the city's flag carrier, saw inbound passenger traffic decline 38% in September. Meanwhile, the hotel occupancy rate for the month tumbled to 63% compared with 86% a year earlier. Average nightly room rates slid 22.5%, and visitors to the city fell 34.2% from a year earlier, according to the Hong Kong Tourism Board.

Hyatt Hotels said last month that revenue per available room slumped 36% in the third quarter in Hong Kong and worsened in October to more than 50%.

Overall, nearly twice as many companies expect business to worsen during the current quarter compared with three months ago, according to a regular government survey of 540 local companies.

The protests could extend Hong Kong Disneyland's losses to five consecutive years. The theme park in February said its net loss for the fiscal year ending September 2018 narrowed to 54 million Hong Kong dollars ($6.9 million) from HK$345 million a year earlier, as it posted record revenue and boosted attendance by 8%. Visitors from mainland China climbed 34%.

Hong Kong Disneyland will announce earnings for the year ending September 2019 in February.

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