Disney Profits Cut in Half by Weak Flicks, Parks Slump

 

The Walt Disney Co. said Tuesday its second-quarter net income fell 46 percent, dragged down by an underperforming movie slate and the impact of the recession on its theme parks. But its results narrowly beat Wall Street forecasts and its shares rose.

The family entertainment giant’s profit in the quarter through March 28 was $613 million, or 33 cents per share. That was down from $1.13 billion, or 58 cents per share, a year earlier.

Revenue fell 7 percent to $8.09 billion.

The company said its studio was to blame for a 97 percent drop in movie profits, despite strong industrywide box office revenues in the U.S. and Canada, which are up 16 percent so far this year.

Among its disappointments was “Confessions of a Shopaholic,” which came out in February as moviegoers were coping with a deep economic recession.

“It’s not the marketplace. It’s our slate,” Chief Executive Bob Iger told analysts on a conference call. “After posting strong results last year, studio performance was disappointing, something they would be the first to admit.”

Disney booked about $305 million in charges in the quarter, including $102 million in restructuring costs, about half of which came from cutting some 1,900 positions at its parks division.

Excluding restructuring charges and other items, the earnings fell to 43 cents per share, just above analyst expectations for 40 cents per share, according to Thomson Reuters. Analysts expected slightly higher revenue, $8.15 billion.

Disney shares closed at $23.15, up 1.3 percent, before the earnings report, and rose another 90 cents, or 3.9 percent, to $24.05 in after-hours trading.

Studio operating profits fell to $13 million from $377 million as theatrical releases such as “Bedtime Stories” and “Race to Witch Mountain” did not fare as well as movies that came out in the same period a year ago, such as “National Treasure 2: Book of Secrets,” and “Hannah Montana/Miley Cyrus: Best of Both Worlds.” Home video movie sales were also hurt by a weaker lineup.

Revenue at the studio fell 21 percent to $1.44 billion.

Disney said the recession led visitors to spend less money in its theme parks, though U.S. attendance was even with last year because of heavy discounting. Parks and resorts operating profits fell 50 percent to $171 million, while revenue dipped 12 percent to $2.41 billion.

Attendance was down 1 percent at Walt Disney World in Orlando, Fla., but up 2 percent at the Disneyland parks in Anaheim. Spending per visitor to the U.S. parks fell 6 percent overall.

Iger said talks with the Hong Kong government to expand its theme park there “have been productive.” Results improved versus a year ago. Meanwhile, the company is awaiting word from China’s central government about building a theme park in Shanghai, he said.

Cable network profits from ESPN, ABC Family and the Disney Channel grew 5 percent to $1.14 billion as fees from cable and satellite affiliates rose despite a decline in ad revenue.

Broadcast profits at the ABC television network and its ABC stations fell 38 percent to $162 million amid the advertising downturn.

TV station revenue declined 30 percent but was partially offset by sales of ABC shows such as “Ugly Betty” overseas.

Taken together, cable and broadcast revenue rose 2 percent to $3.62 billion.

Standard & Poor’s equity analyst Tuna Amobi said the company needs a consumer spending rebound to help revive its theme parks and its advertising-dependent businesses such as ABC and ESPN.

“The good thing is that the economy is starting to bottom out in the second quarter,” Amobi said. “The question is, how long does it take the parks and everything to recover to levels we’ve seen a few years ago? This is more and more of a patience story, the way we see it.”

Consumer products revenue grew 9 percent to $496 million, but operating profit fell 24 percent to $97 million. The revenue boost, which came from taking back ownership of Disney Stores in North America, also led to lower merchandise licensing royalties.

Interactive Media revenue for the quarter fell 17 percent to $129 million. The operating loss widened by 2 percent to $61 million.

Disney said last week it would make older Disney movies and ABC shows available on Hulu.com, while taking an equity stake alongside NBC Universal and News Corp.

Iger said the company chose to make its content available on Hulu’s ad-supported free platform over Google Inc.‘s YouTube partly because Hulu was better suited to long-form content and allowed Disney to take part ownership.

But he said Disney would continue to make its content available online in multiple ways to capture younger audiences, including through an online subscription service it is developing.

“The possibility of our long-form content ending up on the YouTube platform still exists, by the way,” he said.

5/5/2009 7:54 PM RYAN NAKASHIMA AP Business Writer LOS ANGELES