And yet this one puts a positive spin on it...
Friday June 22, 4:59 pm Eastern Time
Despite Stumbles, Disney Stays Solid
Walt Disney Remains Strong, Despite Stumbles at New Theme Park and Box Office, Analysts Say
By GARY GENTILE
AP Business Writer
LOS ANGELES (AP) -- The long-term outlook for the Walt Disney Co. remains strong, despite this summer's
stumbles at its new theme park and at the box office, analysts say.
Like many large media companies, Disney is suffering the effects of low consumer confidence and a sluggish economy.
Advertising spending has declined, reducing revenue at the company's ABC television and radio networks, and people
are postponing expensive vacations, resulting in lower attendance at Disney's theme parks.
Disney has also experienced stiff competition at the box office this summer, some of it from its own marketing machine.
The $150 million World War II epic ``Pearl Harbor'' is expected to make money for Disney, but has not been the
blockbuster the studio had expected. And the hand-animated ``Atlantis: The Lost Empire,'' had a weak national opening
last weekend against the live action ``Tomb Raider'' from Paramount and is likely to be overshadowed through the
summer by the computer-animated ``Shrek'' from DreamWorks SKG.
Adding to Disney's woes are the resignation this week of its studio chief, Peter Schneider, after only 17 months on the
job and continuing problems attracting visitors to its latest theme park, Californian Adventure, in Anaheim.
This week, Disney said it would cut admission prices for Southern California residents by $10 through the summer and
allow one child in for free. Disney has reintroduced its famous electrical parade to the park and will open a new
attraction in the fall based on its hit television game show, ``Who Wants to be a Millionaire.''
``They will make this work,'' said David Miller, an analyst at Sutro & Co. ``Disney will continue to tweak the asset.
They've had this situation before with Euro Disney. They had this situation before with Epcot. Even Disney's Animal
Kingdom in 1998 opened to lackluster attendance in a bang-up economy and that is now doing well.''
Investors have not abandoned the stock, which was been hovering around $30 for weeks. Its stock closed down 91
cents at $29.19 in trading Friday on the New York Stock Exchange.
And analysts say that despite expectations of lower earnings in the next quarter, the company should rebound by the
end of the year and into 2002.
``If you look at a chart, in the latter half of 1992, after the Federal Reserve decreased interest rates, just like they are
doing now, Disney stock was up over 30 percent in the back half of 1992,'' Miller said.
The company still faces serious challenges. Disney is shutting many of its money-draining retail stores and remodeling the
rest, increasing the shelf space and the products sold. It is also entering into new licensing agreements, offering
Disney-branded juices, toothbrushes and clothes at stores such as JC Penney and KMart (NYSE:KM - news).
Disney should see significant revenue from the release of ``Snow White'' on DVD in the fall, according to Merrill Lynch
analyst Jessica Reif Cohen. And its computer-animated film, ``Monsters, Inc.,'' made with its ``Toy Story'' partners,
Pixar Animation, should also do well in a fall theatrical release.
Nevertheless, Cohen last week revised her earnings estimates for Disney for the third quarter and the fiscal year. She
said Disney's earnings per share should drop 10 percent in the third quarter, to 21 cents, compared with 23 cents in the same quarter last year. Revenue should decline 1 percent to roughly $6 billion, Cohen said. |
