Disney Shares Fall After Iger Says Theme-Park Bookings Decline

Disney Shares Fall After Iger Says Theme-Park Bookings Decline

By Andy Fixmer

Nov. 7 (Bloomberg) -- Walt Disney Co. fell as much as 6.1 percent in New York trading after the world's biggest theme-park operator said fewer visitors are booking resort vacations in the slowing U.S. economy.

Reservations have ``fallen off considerably'' in the past month, Chief Executive Officer Robert Iger said on a conference call yesterday, after reporting a 13 percent decline in fiscal fourth-quarter net income. Disney is offering discounts and merchandise credits to spur attendance at the parks, where profit dropped 4.2 percent.

Earnings also declined at Disney's television and film businesses. As U.S. consumers pull back spending, advertising cutbacks have led media-industry competitors News Corp., CBS Corp. and Viacom Inc. to lower their forecasts.

``There's little place to hide right now from the recessionary downturn,'' Janna Sampson, co-chief investment officer at Oakbrook Investments LLC in Lisle, Illinois, said in an interview. Disney's ``quarter was uglier than anyone anticipated.''

Disney fell $1.12, or 4.9 percent, to $21.69 at 9:32 a.m. in New York Stock Exchange composite trading after earlier declining to $21.41. The stock had lost 29 percent this year before today.

Net income dropped to $760 million, or 40 cents a share, from $877 million, or 44 cents, a year earlier, the Burbank, California-based company reported. Excluding bad debt from Lehman Brothers Holdings Inc.'s bankruptcy and other one-time items, profit of 43 cents missed the 49-cent average of 19 analysts' estimates compiled by Bloomberg.

Sales increased 5.8 percent to $9.45 billion, exceeding the $9.33 billion average estimate.

Parks Slowdown

Disney reported parks and resorts profit of $412 million, down from $430 million a year earlier. Sales at the unit rose 6.5 percent to $2.97 billion.

Reservations are off 10 percent for parks visits this quarter and next quarter compared with the year-earlier periods, Iger said. Holiday bookings at Walt Disney World near Orlando, Florida, are down 1 percent, he said. Visitors who book four nights will receive an additional three for free, plus a $200 credit to spend on food or merchandise.

``People want to take vacations in 2009 but they are much more value-focused,'' Iger said. ``That's why we have seen bookings fall off somewhat.''

The strengthening U.S. dollar is making the trip to Disney World less affordable for foreign tourists, who have bolstered Disney's parks this year. Resort profit may decline 12 percent this fiscal year as the U.S. economy shrinks, said Barclays Capital analyst Anthony DiClemente before yesterday's report.

Economic Slowdown

Disney is suspending share buybacks to preserve capital because of turmoil in worldwide credit markets, Chief Financial Officer Tom Staggs said on the conference call.

The U.S. economy shrank 0.3 percent in the third quarter, the Commerce Department said on Oct. 30. Gross domestic product will contract 0.7 percent next year, the International Monetary Fund forecast in a report yesterday.

``Going forward, it becomes a question of how long and how deep this economic recession will last,'' Oakbrook's Sampson said. ``And that's very, very difficult to predict.''

News Corp. said this week that profit would decline at least 13 percent in fiscal 2009 as advertisers cut spending by as much as half because of the credit crisis. CBS and Viacom, both controlled by Sumner Redstone, also cut estimates because of the slowdown in ad spending.

TV, Film

Profit in Disney's media networks segment, which includes cable and broadcast television, dropped to $1.06 billion, dragged down by a $150 million loss at ABC as advertisers cut spending. Ad sales at TV stations are ``off considerably,'' Iger said.

Cable networks including ESPN and Disney Channel earned $1.2 billion, a $116 million increase, helped by gains in fee income from cable operators.

Earnings from Disney's film business fell 42 percent, reflecting weaker performance at the box office and marketing costs for ``Beverly Hills Chihuahua,'' released after the end of the period. Profit of $98 million compared with $168 million a year earlier.

Profit at the company's consumer products division, which licenses merchandise and operates retail stores, climbed 14 percent to $176 million. The unit's revenue gained after the May acquisition of 200 retail stores.

Disney said in court documents last month that it's owed about $92 million from Lehman Brothers. The company petitioned a judge to appoint an examiner to investigate Lehman's movement of funds internally around the company's Sept. 15 bankruptcy filing.

 

I watch the disney stock and there was certainly an opportunity to buy some last week. ; It is on climb back up, but still a far way from what it was. ; Good place to stick a little extra money if ya got it.

 

here's a story from the 9th that on the slow climb back...

Disney stock rebounds
Nov 9, 2008

The Walt Disney Company's stock rebounded after the initial downturn which followed the release of the company's earnings statement on Thursday.

The Burbank, California company reported earnings of $760 million, or 40 cents a share, for the fourth quarter which ended on September 27, 2008. This was in contrast to the 2007 fourth quarter earnings of $877 million, or 44 cents a share.

While Disney reported a 6% rise in revenue to $9.45 billion based on its theme parks and cable networks, it was offset by a $91 million bad-debt charge on a payment it was to receive from now bankrupt Lehman Brothers. Disney's finances were further hurt by increased operating expenses as well as weakened sales at the box office. The company indicated that without the Lehman debt and other special items, its earnings would have been 43 cents a share. Prior to the release of the earnings statement, analysts had expected a fourth quarter profit of 49 cents a share.


Friday saw an 8% drop in the company's stock value when the market opened. Disney's stock then gained 5% and closed up by 2.4% at $23.36.

Tuna Amobi, Standard and Poors analyst changed his recommendation from "strong buy" to hold. He advised his clients "In a sobering near-term outlook, Disney sees further sharp deterioration in park bookings and ABC/ESPN ads, while halting share buybacks."

While some analysts share Amobi's concerns, others feel that Disney is prepared to face the challenges of today's economy. Deutsche Bank's Doug Mitchelson stated "Unlike some peers, Disney's challenges are predominately cyclical, not secular. Currency risk is fully hedged. Its brands remain strong and growing, and barriers to entry in its businesses are very high."

Disney's CEO Bob Iger commented that the economy has resulted in consumer confidence being at its lowest point in three decades and that spending is expected to "almost certainly" be less during 2009 as well as for the 2008 holiday season. Iger stated that consumers are being "very careful about what they spend." He also indicated that theme park business and resort bookings "have fallen off considerably."

Citing Disney's response to the turmoil of 2001, Iger stated "This is a team that manages through good times and really tough times, particularly in the 2001 period. So not only have we gone through this before, we've gotten better at it, particularly in the parks and resorts."

While Disney cable division has been strong, its ABC network had an operating loss of $150 million due to a decrease in advertising revenue, costs of election coverage and a delay in determining which new shows will be added to its lineup.

Disney's theme parks saw revenue up by 7% to $3 billion during the last quarter, but this was accompanied by a 4% decrease in domestic operations. This latter figure would have been lower had it not been for good results at its Disneyland Resort Paris.

 

Listening to Bloomberg radio this week, and they saying Disney stock is one of those deals everyone should take advantage of. ; Unforetunately for us Canadians, we also have to take into consideration they exchange rate. ; Which currently sucks! ; If the dollar goes up, were definately stocking up (no pun intended).