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WORLD> America
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Economic downturn hits Disney, shares slide
(Agencies)
Updated: 2008-11-07 11:28 LOS ANGELES -- The global economic downturn hit Walt Disney Co's quarterly results harder and faster than Wall Street expected, with the company on Thursday reporting a sharp decline in hotel bookings and softness in advertising revenue at its networks.
Disney's shares slid 9 percent in extended trade but recovered a bit after executives announced plans to discount stays at Walt Disney World to stimulate bookings in the first half of 2009. "Consumer confidence is the lowest we've seen in over three decades, and even the best product out there is feeling the effect," Disney Chief Executive Robert Iger told analysts on a conference call. Disney's dour view came hours after US retail chains posted their worst October sales results in more than 30 years as consumers cut spending sharply in the face of a financial crisis that has derailed the US economy. On the call, Iger said senior executives were looking at ways to cut costs companywide. "Significant savings will be delivered," he said. The news came as the No. 2 US entertainment company reported a 13 percent decline in quarterly net income due in part to a bad debt charge. Revenue, however, topped Wall Street analysts' estimates. "We kind of expected a rapid deceleration, but this is even worse than even we or investors were expecting ... in its severity and in how fast this is affecting them," Pali Capital analyst Rich Greenfield said of the theme parks results. Disney reported net earnings of $760 million, or 40 cents per share, down from net earnings of $877 million, or 44 cents per share in last year's fourth quarter. Revenue rose 6 percent to $9.45 billion from $8.93 billion a year earlier. Analysts, on average, expected revenue of $9.33 billion for the quarter, according to Reuters Estimates. A Tougher Marketplace Disney said the advertising climate had softened the performance of its cable and broadcast networks in the fourth quarter, and that its US theme parks and resorts suffered under higher labor and fuel costs. Executives said attendance at Disney's US theme parks is down 1 percent so far in the current quarter and that bookings for the first two quarters of fiscal 2009 are down "a little under 10 percent" from last year. "We are seeing a marketplace that is clearly tougher than it was in fiscal year 2008 and our ability to predict is very limited," Iger said. He added, however, that consumers may be taking "a wait and see approach" to booking vacations next year. Typically, Disney said, consumers plan vacations 10 to 12 weeks in advance. Caris & Co analyst David Miller saw a positive note in the fact that bookings in the current quarter were down just 1 percent versus last year's record attendance. "People thought attendance would be down much harder," Miller said. "I think the stock price is reflecting Armageddon at the parks. Of course the parks are going to slow, but is that deserving of $20 a share?" Shares of Disney fell 4.7 percent to $21.73 after closing down 5.9 percent at $22.81 on Thursday. The company has seen its share price fall nearly 25 percent since its fiscal fourth quarter ended September 27, as the Dow Jones Industrial average declined about 20 percent. |
