Walt Disney said park bookings were flat and it had detected weakness in advertising sales in the current quarter, sparking fears that U.S. economic woes will hit its results and sending its shares down 1 percent in Europe.
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The entertainment conglomerate had earlier on Wednesday reported a fiscal third-quarter net profit that beat analysts' estimates by a hair, rising 8.5 percent on one-time gains and strength at its media networks, including sports channel ESPN.
Caris & Company analyst David Miller said the company "overall did very well", adding that investors may have been spooked by the ad sales slowdown at ESPN and wondering "when is this economic slowdown going to hit the parks, if at all?" (See more in the accompanying video.)
Third-quarter net income rose to $1.28 billion, or 66 cents per share, from $1.18 billion, or 57 cents per share, a year earlier. Revenue rose 2 percent to $9.24 billion.
The earnings, excluding a 4 cent gain from the acquisition of the Disney Stores in North America, the sale of Movies.com and a favorable resolution of prior-year tax matters, beat Wall Street's average estimate of 61 cents per share, according to Reuters Estimates.
Chief Executive Robert Iger said on a conference call with analysts that the company continued "to be pleased with the level of business activity we have seen ... and especially with our long-term market position."
Disney shares ended the June quarter down 11 percent from quarterly highs of about $35, as investors worried about the effects of high fuel costs and economic pressures on consumers and the company's theme parks.
"I don't think the forward-looking comments they made were discouraging, everything put together," Standard & Poors Equity Research analyst Tuna Amobi said. "I don't share the sentiment that things are going awfully wrong."
Holiday Cheer
The theme parks posted a 5 percent rise in revenue and 3 percent gain in operating profit, driven by strong performances at Walt Disney World Resort and Disneyland Resort Paris.
Attendance dropped 1 percent at domestic parks, offset by a rise in average guest spending. Hotel occupancy at U.S. resorts dropped to 92 percent from 93 percent a year earlier.
Chief Financial Officer Tom Staggs said hotel bookings at U.S. parks were flat in the current quarter, but "modestly ahead" of last year in the holiday quarter ending in December.
He also said pricing for booked rooms "at this point are at or above the prior year."
Iger said diminished airline capacity to Orlando, Florida, had not affected Disney World attendance at all, "nor do we envision, in the near term anyway, that it will be a factor."
Media networks had 8 percent revenue growth and a 9 percent rise in profit last quarter. Contractual rate increases from pay-TV operators and subscriber growth at ESPN and the worldwide Disney Channel accounted for most of the 12 percent revenue increase at the cable networks, while programming and other costs rose 9 percent.
A 2 percent revenue increase in broadcasting revenues, due to higher international sales of TV shows and higher online and other revenue mainly at Club Penguin, offset lower ad revenue at Disney-owned TV stations.
Staggs said the pace of ad sales "has slowed somewhat in recent weeks" at ESPN and, to a lesser extent, its broadcast network due to softness in the auto, financial services and consumer electronics segments.
Staggs said, however, that spot or "scatter" ad sales were pacing "well ahead" of advance sales in the current quarter.
Studio entertainment, whose disappointing "The Chronicles of Narnia: Prince Caspian" promised to drag on company results, saw quarter revenue drop 19 percent and operating profit fall 49 percent because of tough comparisons with last year's blockbuster "Pirates of the Caribbean" sequel.
Revenue from consumer products rose 20 percent, mainly due to the acquisition in May of the Disney Stores in North America, but lower sales of self-published video games led to a 4 percent decline in operating profit in the quarter.
The video game business also suffered from difficult comparisons between sales of "Prince Caspian" and last year's "Pirates of the Caribbean" games.
Staggs said the company expects to see a "modest" reduction in profits for the rest of this year as a result of its reacquisition of Disney Stores in North America.