Tags: US | Earns | Disney

Disney Posts Flat Profit as Consumers Spend Less

Wednesday, 10 Feb 2010 06:12 AM

 

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Consumers sent tepid signals to The Walt Disney Co. during the holiday quarter, as many of them still required discounts to step into theme parks and reduced spending on food, beverages and merchandise when they got there.

A nascent advertising recovery also had an uneven effect on the company, as ESPN benefited from higher ad revenue, while the ABC broadcast network suffered from fewer viewers and lower advertising rates. The Disney Channel, which doesn't run commercials, saw fees from cable and satellite operators grow.

"At this point we have limited visibility regarding the economy and its impact on our businesses," Chief Executive Bob Iger said on a conference call. "Thus we will continue to focus on controlling costs while creating great content and experiences and building our brands."

Disney is closely tethered to consumer confidence. Its theme parks, stores and movies are a good barometer of how freely people are spending their extra cash.

Disney said it earned $844 million in its fiscal first quarter, which ended Jan. 2, roughly flat compared with a year earlier. Revenue rose 1 percent to $9.74 billion. Although both measures beat analyst forecasts, shares were little changed in after-hours trading.

Iger said the goal at theme parks was to "slowly wean our guests off discounting. ... We don't believe that we're dealing with an economy right now that enables us to shut off the discounting immediately."

As an example, Disney said that at about half the hotel rooms at Walt Disney World in Orlando, Fla., the company is now offering seven nights' stay for the price of five, instead of the four it began offering earlier.

Theme park revenue was flat at $2.66 billion as a decline in attendance at Disneyland Paris and Walt Disney World was offset by higher attendance at Disneyland in Anaheim, Calif.

Movie studio revenue was down just slightly at $1.94 billion, although cost-cutting helped profits, including from the release of the Pixar animated movie "Up" on home video. Sales of consumer products fell 3 percent to $746 million.

Disney overhauled its movie studio in October following more than a year of disappointing box-office results. Iger confirmed reports that the company is considering the sale of award-winning label Miramax, which it acquired from Bob and Harvey Weinstein in 1993 for $80 million.

He said investing in new Miramax movies "wasn't necessarily a core strategy of ours," and that new investment will be limited to releasing six remaining films that are near completion through 2011.

"With that, we believe that it would be prudent for us to explore all of our options," he said.

The company also completed its acquisition of Marvel Entertainment Inc. in the quarter. It hopes the purchase will spur new movies and product lines based on Marvel's huge comic book universe.

The latest quarter, as have past quarters, was saved by the strength of ESPN. Disney also touted the international growth of the Disney Channel. Media networks revenue, which includes the ABC broadcast network and TV stations, was up 7 percent at $4.18 billion.

The results beat analyst forecasts. Excluding one-time items, the company earned 47 cents per share, compared with 41 cents per share in the prior-year quarter. Analysts polled by Thomson Reuters were expecting adjusted earnings of 39 cents per share on $9.62 billion in revenue.

Shares in Disney, which is based in Burbank, gained 4 cents to $29.88 in extended trading after the results were announced. Earlier, it closed up 36 cents, or 1.2 percent, at $29.84.

© Copyright 2014 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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