Disney's 4Q net income falls 13 percent
LOS ANGELES -- The Walt Disney Co., the family entertainment company that owns ESPN and ABC, on Thursday predicted tough times ahead as advance bookings at its theme parks slowed for the holidays. The company also reported a 13 percent decline in fourth-quarter income.
The company's earnings fell below analysts' expectations, in part because it had to set aside a cash reserve to handle fallout among its businesses from the bankruptcy of Lehman Brothers.
Another factor was a 42 percent drop in Disney's movie studios operating profit to $98 million on flops such as "Swing Vote" and "Miracle at St. Anna." Also its loss at the ABC network and its 10 TV stations nearly quintupled to $150 million as advertising spending slowed.
"Consumer confidence is the lowest we've seen in over three decades, and even the best product out there is feeling the effect," Chief Executive Robert Iger told analysts on a conference call.
"While we have great demand in the marketplace, we believe consumer spending will be down," he said. "That could impact us possibly during the holiday season but almost certainly during calendar season 2009."
Attendance fell 1 percent in the quarter at its U.S. parks in Anaheim, Calif., and Orlando, Fla., while advance bookings at Walt Disney World through the Christmas holiday period are down 1 percent, Iger said.
As he warned of a downturn, he also announced the company would begin offering seven-night stays at Walt Disney World for the price of four in the new year.
"I think the price-to-value relationship has probably never been more critical," he said.
Disney shares slipped 87 cents, or 3.8 percent, in after-hours trading to $21.94. They closed Thursday at $22.81, down 5.9 percent, or $1.42.
Net income in the quarter that ended Sept. 30 fell to $760 million, or 40 cents per share, from $877 million, or 44 cents per share, a year ago.
Revenue grew 5.8 percent to $9.45 billion from $8.93 billion.
Adjusted earnings came to 43 cents per share, up from 42 cents.
Analysts, who typically exclude one-time items, on average expected Disney to earn 49 cents per share on revenue of $9.3 billion, according to Thomson Reuters. Among the one-time charges that hit net profit was the creation of the cash reserve for Lehman, which amounted to 3 cents per share.
Media Metrics analyst Laura Martin said she was disappointed at the size of the collapse at the film studio and at ABC. "Studio was a big miss. Broadcasting was a huge miss," she said.
Studio revenue fell 5 percent to $1.45 billion from $1.53 billion, while revenue at Disney's television networks grew 4 percent to $4.21 billion from $4.03 billion, driven by higher affiliate fees but lower advertising revenue at ESPN.
Revenue at the ABC component of television networks grew 4 percent, but the higher pilot development costs, pushed into the fourth quarter by the writers' strike, as well as lower ads and lower ratings contributed to a big loss.
Parks and resorts revenue rose 7 percent to $2.97 billion, and consumer products revenue rose 41 percent to $812 million.
For the year to Sept. 27, Disney's revenue grew 7 percent to $37.84 billion from $35.51 billion, while net profit fell 5.5 percent to $4.43 billion, or $2.28 per share, from $4.67 billion, or $2.25 per share.