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Disney dismayed with 2Q
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April 27, 1999: 9:24 a.m. ET
Lower earnings attributed to weakness in merchandising, home video
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NEW YORK (CNNfn) - Walt Disney Co., hurt by weakness in its traditionally strong product licensing, reported lower fiscal second-quarter earnings Tuesday.
The Burbank, Calif.-based entertainment conglomerate said earnings in the quarter ended March 31 fell to $269 million, or 13 cents a diluted share, from $384 million, or 18 cents, a year earlier.
The latest results, which exclude the effect of the company's acquisition of a stake in Infoseek Corp., were in line with the consensus of analysts' estimates compiled by First Call.
Including Infoseek, net income for the quarter was $226 million, or 11 cents a diluted share.
Revenue for the quarter rose 5 percent to $5.51 billion.
For the first six months of its fiscal year, Disney's (DIS) net income fell to $848 million, or 41 cents a diluted share, from $1.14 billion, or 55 cents. Revenue rose 4 percent to $12.10 billion.
The company said its poor showing in the first half can't be overcome by whatever improvements are made in the second half.
"Although the Disney franchise has a demonstrated ability to drive long-term growth, we are definitely not satisfied with our long-term performance," Disney Chairman Michael Eisner said. "As a result, we are taking a number of steps, including an across-the-board assessment of our cost structure, to address the situation."
Disney, long the master of selling clothes, toys and other paraphernalia featuring its characters, found it more difficult to sell such stuff in the first three months of 1999. "Merchandise associated with this year's film and television programming has fallen short of expectations, and difficult conditions in international markets continued to impact our licensing revenues," Eisner said.
The weakness was reflected in a comparable- store sales decline for The Disney Store, the company's chain of merchandising outlets.
Also hurting Disney was weakness in home video. Despite the success of the release of the animated feature "Mulan" in February, comparisons were difficult due to the strong sales of "The Little Mermaid" and "Peter Pan" in the year-earlier period.
On the positive side, the company's theme parks reported record attendance and increased guest spending. Disney's broadcasting units posted higher revenue, although operating income declined due in large part to higher programming costs associated with ESPN's and ABC's contracts to broadcast National Football League games.
"We intend to make our businesses more efficient, increase our cash flow, and position ourselves to better capitalize on the long-term growth potential of our brands," Eisner said.
Disney shares closed Monday at 35, up 1/2. 
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