By Andy Fixmer
Feb. 4 (Bloomberg) -- Walt Disney Co. (http://www.bloomberg.com/apps/quote?ticker=DIS%3AUS), the second-largest U.S. media company, fell 6.3 percent in New York trading after first-quarter sales and profit missed analysts’ estimates because of flagging ad sales and consumer spending.
Net income declined to $845 million, or 45 cents a share, from $1.25 billion, or 63 cents, a year earlier, Burbank, California-based Disney said yesterday in a statement. Sales dropped 8.2 percent to $9.6 billion.
The company will deliver “very significant” savings by restructuring and cutting jobs, Iger said on a conference call. Disney, the world’s biggest theme-park operator, is the first of the large U.S. media companies to post results. Time Warner Inc. (http://www.bloomberg.com/apps/quote?ticker=TWX%3AUS), the world’s biggest media company, said today earnings may be little changed this year after fourth-quarter results missed analysts’ estimates. News Corp. reports tomorrow.
“The costs cannot be cut anywhere nearly as quickly as the revenue declines, because there’s a lot of infrastructure in there in creating product and investing in content,” David Joyce, an analyst at Miller & Tabak Co. in New York, said in an interview. “So there’s not too much they can do.”
Disney fell $1.29 to $19.33 at 9:32 a.m. in New York Stock Exchange composite trading (http://www.bloomberg.com/apps/quote?ticker=DIS%3AUS). The shares lost 30 percent last year.
The company has already fired 200 employees (http://www.bloomberg.com/apps/quote?ticker=DIS%3AUS) at ABC and eliminated 200 unfilled jobs in response to the deepening recession. The ESPN unit eliminated 200 open positions, froze hiring through September 2010 and halted executive raises. Disney’s parks offered voluntary buyouts to 600 executives.
Excluding a gain from the sale of two pay-TV services, profit was 41 cents, missing the 51-cent average estimate (http://www.bloomberg.com/apps/quote?ticker=DIS%3AUS) of analysts.
Revenue missed the $10 billion average of 16 analysts’ estimates (http://www.bloomberg.com/apps/quote?ticker=DIS%3AUS) compiled by Bloomberg and fell from $10.5 billion a year earlier, reflecting shrinking DVD sales, falling advertising revenue in broadcast and cable television, and lower results from theme parks.
The company will choose films more carefully, spend less on marketing and cut DVD production costs, Iger said.
“We must make efficiencies and become better at what we do,” Iger said on the call.
Studio profit plunged 64 percent to $187 million on fewer top-selling DVD titles. Revenue fell 26 percent to $1.95 billion. Catalog sales and holiday releases including “WALL-E” and “The Chronicles of Narnia: Prince Caspian” failed to match the year- earlier results from “Pirates of the Caribbean: At World’s End,” “High School Musical 2” and “Ratatouille.”
“Pressure on the business has only grown,” Iger said.
Theme-park profit declined 24 percent to $382 million on 3.9 percent lower revenue as Disney offered discounts on lodging and merchandise in Florida and Southern California. The promotions have been extended to Aug. 15.
Profit at the parks was also held back by a charge related to fuel-hedge contracts.
Bookings through June are running ahead of a year earlier, Tom Staggs (http://search.bloomberg.com/search?q=Tom+Staggs&site=wnews&client=wnews&proxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=wnnis&sort=date%3Cimg%20src=%22images/smilies/grin.gif%22%20border=%220%22%20alt=%22%22%20title=%22grin%22%20smilieid=%2230%22%20class=%22inlineimg%22%20/%3E:S:d1), chief financial officer, said on the call.
Profit from TV networks, Disney’s largest business, tumbled 29 percent to $655 million, with revenue dropping 5 percent to $3.9 billion. Industrywide, advertisers are cutting spending to cope with the U.S. recession.
ABC recorded a $60 million charge for bad debt tied to the bankruptcy filing of Tribune Co., Staggs said on the call. The network will spend more developing new programs this year, he said. The ESPN sports unit has a $25 million reserve against money owed by Charter Communications Inc.
Cable network revenue rose 1.7 percent to $2.45 billion as subscriber fees from cable and satellite TV operators countered falling advertising sales.
Ad sales at the ESPN networks fell a “high single digit” percentage, Staggs said. ESPN’s biggest fixed cost is sports contracts, he said.
Profit from consumer products, the division that includes merchandise licensing, video games and the company’s retail stores, declined 7.7 percent to $265 million. Sales gained 18 percent, reflecting the acquisition of Disney outlets.
Disney reported interactive results for the first time. The unit had sales of $313 million, up 13 percent from a year earlier, and an operating loss of $45 million, compared with a gain of $13 million last year.
Time Warner reported a $16 billion loss (http://www.bloomberg.com/apps/quote?ticker=TWX%3AUS) in the fourth quarter, its first in 14 quarters, as AOL and magazine ads plunged, consumers bought fewer DVDs and the company recorded a $24.2 billion goodwill writedown to reflect the declining value of its assets.