Earnings Report: Year-ago Star Wars, Frozen Sales Create Difficult Comparisons for Disney Consumer Products
Income for Disney’s Consumer Products and Interactive Media division, up against tough comparisons with year-earlier sales of Star Wars and Frozen merchandise, will plunge 20% in fiscal Q1 (which ends at the end of the current calendar year), but recover to post growth for the full year, Disney CFO Christine McCarthy told analysts late Thursday.
The downturn would be on top of a 5% decline in the division’s Q4 operating income to $424 million as revenue, which includes licensing, dropped 17% to $1.28 billion from $1.54 billion. The revenue decline was largely tied to Disney’s scrapping its Infinity console game business earlier this year, the company said. A drop in operating income tied to merchandise licensing was due to continued sluggish sales of Frozen products, partly offset by gains in Finding Dory/Nemo items, the company said.
Sales of Frozen-related products will continue to decline in 2017, but the drop will be offset by revenue from products linked to a series of movies, including Beauty and The Beast, Cars 3, Guardians of the Galaxy 2 and Pirates of the Caribbean, McCarthy said.
Amid a companywide 3% decline in Q4 revenue to $13.14 billion, CEO Robert Iger conceded Disney is going through a transition period and predicted modest growth for next fiscal year. The projection was rare for a company that typically steers clear of offering forecasts and came after its Q4 earnings fell short of Wall Street forecasts. Disney posted earnings per share of $1.10, short of Wall Street analysts’ projections for $1.16 on $13.52 billion in revenue.
With new movies on the horizon, Disney will continue to spread its brands across parks and consumer products, Robert Iger said. New Star Wars sections are under construction at Disney World and Disneyland. Eleven Disney franchises posted global retail sales merchandise of $1 billion or more in the year ended Sept. 30, Iger said.
“We talk about the studio results as it relates to box office and the bottom-line for that business, but you also have to think about it in terms of how we mine these assets not just in the United States, but globally at our parks and in consumer products,” Iger said.
Disney posted a 10.6% gain in Q4 total net income to $1.77 billion.