The Walt Disney Co. on Tuesday reported lower-than-expected net income and revenue for the second quarter due to the poor box-office performance of "Mars Needs Moms" and the temporary closure of theme parks in Japan following the earthquake and tsunami.
Revenue at the company's parks and resorts improved during the quarter as Disney eased back on discounts and guests spent more on tickets and hotel rooms. But costs to launch the Disney Dream cruise ship in January, the Japan quake in March and the shift of the Easter holiday to later in April hurt the division's profits.
"Mars Needs Moms" bombed at the box office and drove a $70 million drop in studio profit. That division also faced a tough comparison to the year-ago period, which benefited from the re-release of "Toy Story" and "Toy Story 2" on DVD and the billion-dollar-grosser "Alice in Wonderland" in theaters.
Revenue and profit at Disney's television networks ESPN and ABC grew thanks to higher advertising revenue, although ESPN's profit was hurt by programming costs for the Cricket World Cup. Still, the television networks continued to account for the vast majority — about 86 percent — of the company's operating earnings.
Net income for the three months ended April 2 fell to $942 milllion, or 49 cents per share, from $953 million, or 48 cents per share, a year earlier. The impact of the quake, the shift in Easter, losses on "Mars Needs Moms" and charges related to its acquisition of social game maker Playdom trimmed about 6 cents from latest-quarter profit, Disney said.
Revenue grew 6 percent to $9.08 billion from $8.58 billion a year earlier.
Analysts polled by FactSet were looking for earnings of 57 cents per share on $9.12 billion in revenue.
Shares of the Burbank, Calif.-based company fell $1.17, or nearly 3 percent, to $42.74 in after-hours trading, after gaining 81 cents, or nearly 2 percent, to close the regular session at $43.91 before the report.
Disney said its revamped Disney Stores in North America, and merchandise sales linked to its "Tangled" and "Toy Story" movies, drove growth in consumer products revenue and profit. The company's interactive media division saw losses more than double to $115 million, partly due to the Playdom deal.
Looking ahead, Disney said its television business faces an uphill battle to improve upon last year's third quarter, which benefited from the World Cup soccer tournament and a Celtics-Lakers NBA final that went seven games. This year, the popular Lakers were swept out in the second round of the playoffs. Political ad spending is expected to be down, and fees that ESPN collects from distributors are expected to be booked in the fourth quarter instead of the third.
Hotel room bookings at domestic resorts in the current quarter are down 2.5 percent from a year ago, but Disney has raised rates. The company noted that the aftermath of the Japan quake also represents an earnings risk of "several cents" per share for the rest of the year.
Disney is banking on a ream of summer blockbusters to pull it out of an earnings funk, from "Thor" last weekend and a fourth "Pirates of the Caribbean" later this month, to "Cars 2" in June and "Captain America" in July.
Combined with growing ad revenue and higher attendance and spending at its parks, CEO Bob Iger told analysts that "2011 is shaping up to deliver strong results."
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