Disney Results Disappoint Despite Film Success--3rd Update
May 10 2016 - 6:04PM
Dow Jones News
By Tess Stynes
Walt Disney Co.'s earnings rose a weaker-than-expected 1.7% in
the latest quarter, helped by the popularity of the films "Star
Wars" and "Zootopia" but hurt by lower ad revenue at ESPN and costs
related to its soon-to-open park in Shanghai.
The Burbank, Calif., company also said it was exiting its
Infinity videogame business, resulting in a $147 million charge in
the April 2 quarter.
Disney shares fell 4.6% to $101.73 in recent after-hours trading
as its second-quarter per-share earnings, excluding certain
one-time items, and revenue missed expectations. Through Tuesday's
close, the stock has risen roughly 20% over the past three
months.
Investors have remained focused on subscriber trends at the
company's ESPN sports network and the effect of "cord-cutting" and
"skinny bundles" on Disney's television business.
Disney said Tuesday that while profits rose at ESPN, ad revenue
fell because of lower ratings and rates, which the company blamed
on fewer college football playoff games in the second quarter this
year.
Revenue at the company's media networks' business, revenue edged
down 0.3% to $5.79 billion. Revenue in its cable networks unit,
which includes ESPN, declined 1.9% to $3.96 billion, while
broadcasting revenue rose 3.3% to $1.84 billion.
Earlier Tuesday, ESPN and Verizon Communications Inc. said they
settled a yearlong legal dispute over how the sports network is
distributed by the phone giant's Fios unit. ESPN has been left out
of several channel packages over the years, but in February,
Verizon revamped its base packages to include one with sports
channels like ESPN and one without.
In contrast to Disney's media networks business, growth at the
studio division surged, thanks to the company's recent film
releases. In the latest quarter, Disney's studio division reported
that revenue rose 22% to $2.06 billion.
Next month, the company's $5.5 billion Shanghai Disney Resort
officially opens. Tuesday, Disney said profits at its domestic
sites were partly offset by higher pre-opening expenses for
Shanghai Disney as well as higher costs at Disneyland Paris and
fewer visitors at Hong Kong Disneyland. Revenue in the segment grew
4.5% to $3.93 billion, and profits increased 10% to $624
million.
Consumer products and interactive media revenue declined 1.7% to
$1.19 billion. Disney cited lower same-store sales in its retail
business and lower results for its Infinity videogame business;
however, the company also noted that licensing revenue growth was
driven by Star Wars merchandise.
Disney said it would cease publishing "Infinity," which has seen
sales decline for more than a year amid stagnant consumer interest
and growing competition in the "toys-to-life" category, which
combines real-world toys with videogames. Along with the
cancellation, Disney is cutting between 250 and 300 jobs, a
spokeswoman said, and closing a game-development studio in
Utah.
Over all, for the period ended April 2, Disney reported a profit
of $2.14 billion, or $1.30 a share, up from $2.11 billion, or $1.23
a share, a year earlier. Excluding a write-down for the videogame
business, the company had earnings of $1.36 a share.
Revenue increased 4.1% to $12.97 billion.
Analysts polled by Thomson Reuters expected per-share profit of
$1.40 and revenue of $13.19 billion.
A likely topic on the earnings conference call will be Disney's
CEO succession plans in the wake of Tom Staggs -- once viewed as
the heir apparent to Chief Executive Robert Iger, stepping down
from the No. 2 executive post.
--Ben Fritz contributed to this article.
Write to Tess Stynes at tess.stynes@wsj.com
(END) Dow Jones Newswires
May 10, 2016 17:49 ET (21:49 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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