Walt Disney Co. continues to defy economic gravity.
The Burbank entertainment company on Wednesday reported net income of nearly $1.3 billion, or 66 cents a share, for the fiscal third quarter ended June 28, up 9% from a year earlier. Disney beat analysts' consensus estimates of 60 cents a share, according to Bloomberg, even when excluding an accounting gain related to the acquisition of Disney Stores in North America and the sale of Movies.com, which added 4 cents a share.
For The Record
Los Angeles Times Friday, August 01, 2008 Home Edition Main News Part A Page 2 National Desk 2 inches; 57 words Type of Material: Correction
Disney earnings: An article in the Business section on Thursday about Walt Disney Co.'s third-quarter earnings said the well-received Disney/Pixar Animation film "Wall-E" did not compensate for Disney's underperforming movie "The Chronicles of Narnia: Prince Caspian." "Wall-E" opened June 27, a day before the end of the quarter. Its performance will be reflected in Disney's fourth-quarter results.
Revenue inched up 2% to $9.2 billion, buoyed by the strong performance of ESPN and the expansion of the Disney Channel in overseas markets. Parks and resorts also saw a surprising 5% revenue bump, driven by increases at Disneyland Resort Paris, where the company benefited from a favorable currency rate.
Investors have been nervous about the effect of the deteriorating economy on Disney's theme parks. Pali Research and other firms have pointed to route cuts by domestic airlines into Orlando, Fla., that have reduced the number of seats by 15%. They said fewer flights could translate into lower attendance at Walt Disney World.
Disney Chief Executive Bob Iger told Wall Street analysts during a Wednesday earnings call that flight availability simply "has not been a factor." About half of the visitors to the park fly, he said, but they tend to book early, and account for only about 30% of the seats.
Operating income for parks and resorts, which are Disney's second-largest segment behind its broadcast network and cable channels, climbed 3% to $641 million on revenue of more than $3 billion.
Domestic park attendance was slightly below a year earlier, because the Easter holiday fell early this year and in the previous quarter, said Thomas Staggs, Disney's chief financial officer. Lower attendance was offset by increased spending by visitors to Disney World, he said, and by higher income from firms that sponsor attractions, as Microsoft Corp. and Hewlett-Packard Co. do for the Innoventions Dream Home in Disneyland in Anaheim.
Disneyland attendance, however, declined from last year. Spending at the park dropped 2%, and hotel occupancy was off 5% to about 91%, even though hotel revenue rose 5% because of higher room rates, Staggs said.
Seeking to ease investor anxiety about the parks, Staggs said reservations at the domestic resorts for the fall were "virtually on par" with a year ago and "modestly ahead" of last year for the December quarter.
"The outlook [for the parks] is holding steady," said Anthony J. DiClemente of Lehman Bros. Equity Research. "Investors are focused on whether the next leg of information is going to be a re-acceleration or a deceleration in the year-over-year growth."
Disney's cable networks delivered double-digit gains in operating income, up 14% to $1.2 billion, thanks primarily to sports juggernaut ESPN. Cable network revenue jumped 12% to $2.6 billion.
The Disney Channel, whose "Camp Rock" movie generated what Iger described as "near record" cable ratings and online traffic, also gained subscribers.
But the broadcasting group's operating income fell 11% for the quarter to $260 million, dragged down by lower ad sales at the local television stations. Broadcasting revenue was flat at $1.5 billion compared with the same quarter a year earlier.
Staggs told investors that the pace of ad sales for the local-station group, and to a lesser extent ESPN and the ABC television network, had slowed in recent weeks because of softness in the domestic auto, financial services and consumer electronics markets.
The big bleak spot in Disney's third-quarter results occurred at the movie studio.
Although the Disney/Pixar Animation film "Wall-E" performed well and received wide critical acclaim, it did not compensate for the underperformance of "The Chronicles of Narnia: Prince Caspian." Studio Entertainment division revenue was $1.4 billion, a 19% drop from a year earlier, when Disney released "Pirates of the Caribbean: At World's End." Operating income plunged 49% to $97 million.
The consumer-products unit reported a 20% jump in quarterly revenue to $642 million, driven primarily by the acquisition of Disney Stores in North America and licensing revenue collected on "Hannah Montana" and "High School Musical" merchandise. However, its operating income fell 4% to $113 million from a year earlier, because of sluggish sales of video games and ongoing investment in development.
Shares of Disney fell 77 cents to $30.90 in late trading Wednesday after the earnings announcement. The stock had risen 75 cents to close at $31.67.