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Posted: Fri Nov 13, 2009 5:44 am Post subject: Disney Co. profits up 18% in 4th quarter
Disney Co. profits up 18% in 4th quarter
The Walt Disney Co.’s profit leapt 18 percent during the final three months of its financial year, lifted by the strength of its ESPN sports channels and its television-syndication sales.
Business at the company’s theme parks in Orlando and elsewhere around the world remained soft during the fiscal fourth quarter, and executives at the world’s largest media company said economic conditions are still difficult despite signs that the protracted global recession is easing.
“While there are some signs of recovery, the environment remains challenging and we’re managing accordingly,” Disney Co. Chief Executive Officer Bob Iger said during a late-afternoon conference call.
Burbank, Calif.-based Disney said it earned $895 million during the three months that ended Oct. 3, compared with $760 million a year ago. Revenue climbed 4 percent to $9.9 billion.
Operating profit at Walt Disney Parks and Resorts fell 17 percent during the quarter to $344 million, on revenue that slid 4 percent to $2.8 billion. Park attendance improved, but ongoing discounts continued to eat into profit margins.
The results capped a difficult fiscal year in which Disney was squeezed hard by the recession. Disney said it netted $3.3 billion for the year, down 25 percent from last year, on sales of $36.1 billion, down 4 percent.
For the year, parks-and-resorts’ operating profit tumbled 25 percent, dropping from $1.9 billion to $1.4 billion. Sales fell 7 percent to $10.7 billion.
The fourth-quarter results illustrated the challenge Disney faces in predicting a full recovery at its parks, as wary consumers are booking trips ever-closer to when they actually intend to travel.
Attendance at the company’s U.S. theme parks rose 3 percent during the quarter, when the effect of an extra week in Disney’s fiscal calendar was stripped out, as a 3 percent decline at Disney World was more than offset by a 15 percent jump at Disneyland in Anaheim, Calif. The combined result exceeded Disney’s initial prediction that domestic attendance would be flat with a year ago.
But looking forward to the company’s first quarter — essentially October through December — the company said U.S. bookings are still trailing last year’s pace by 5 percent.
“As we saw in the last few quarters, bookings are tending to take place closer to actual travel dates,” said Disney Co. Chief Financial Officer Tom Staggs, who will take over as chairman of the parks-and-resorts division at the end of the year. “It’s difficult to predict how long the downturn will impact consumer spending and travel.”
Disney executives offered no clues about when they will end the discounting that has helped sustain attendance but generated lower returns from the sale of hotel rooms, tickets, food and merchandise. Per-capita guest spending in Disney’s domestic theme parks was down 10 percent during the quarter compared with last year, and per-room spending in its domestic hotels was off 7 percent.
Just after its fourth quarter concluded in early October, Disney decided to bring back a seven-for-four hotel-night discount that covers travel until nearly the end of March, though the promotion is slightly more restrictive than the earlier iteration.
“Booking trends have actually picked up significantly since we announced the discount, and they had been somewhat sluggish before we did,” Iger said, adding that Disney isn’t worried that customers will become accustomed to promotions. “We have not had a problem weaning consumers off discounts in the past.”
The full-year performance of Disney’s parks division was also hampered by the inability of its time-share unit, Disney Vacation Club, to continue bundling new time-share mortgages and selling them off to investors.
Iger warned that the parks will take longer to fully rebound than some of Disney’s other divisions. “If you look back to prior economic downturns, we tend to lag the recovery a bit,” he said. “That has to do with the way vacations are planned.”
For the year, Disney Co.’s weakest-performing division was its movie studio, where operating profit plunged 84 percent to $175 million. That followed a string of flops, including “G-Force,” “Bedtime Stories” and “Confessions of a Shopaholic,” and an overall decline in the DVD market.
Disney last month ousted longtime movie-studio Chairman nostril Cook and replaced him with Rich Ross, who had been running the Disney Channel. Iger called the studio’s 2009 performance “extremely disappointing.”
The company’s strongest performer continued to be its media networks, particularly its cable-TV operations such as ESPN and ABC Family, where operating profit inched up despite the difficult economy. Including broadcast network ABC, the division’s overall operating profit slipped only 4 percent to $4.8 billion.
Operating profit in Disney’s consumer-products division fell 22 percent for the year, to $609 million. And Disney’s newest and smallest unit, interactive media, posted a $295 million operating loss, 14 percent larger than last year’s.
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