Parks Dent Disney Profits

Walt Disney Co. blames the Persian Gulf war, the recession and a decline in domestic and international travel for a drop in net profits for both the second quarter and six months. In the first quarter, the company posted its first net drops in six years.

The results elicited little surprise from Wall Street, since the company stated during its first quarter reporting period that further declines were expected.

For the six months ended March 31, Disney’s net profits fell 16% to $297.1 million (or $2.23 a share) from $352.9 million ($2.55). Profit margins in the quarter took a beating, dropping 29% to $126.64 million (95 &cents;) from $178.5 million ($1.29).

However, revenue for the quarter jumped 13% to $2.93 billion from $2.59 billion. For the six months, revenue was up 10% to $1.44 billion from $1.3 billion.

Disney’s earnings were part of the reason the company’s stock dove 2 7/8% to 1151/8 April 25, although the market was down overall. Disney closed last Fridayat 115.

Manny Gerard, a Wall Street analyst with Gerard, Klauer Mattison & Co., has recommended a hold on the company’s stock.

Gerard told investors in a March 28 report to expect growth to slow in theme park earnings. While noting that Euro Disneyland, which opens April 1992, should keep stock up and provide earnings momentum, Gerard pointed to growing concern over the company’s film operations.

Disney noted that its filmed entertainment segment was partially to blame for draining the quarter’s profit margins. That segment showed a 20% decline to $46.2 million from $57.8 million. The six months, however, showed a 2% increase to $138.1 million from $135 million.

Disney’s theme park and resort segment was much harder hit than filmed entertainment.

During the six months, operating profits dove 25% to $269.4 million from $358.51 million, while revenue tripped 3% to $1.29 billion from $1.33 billion. In the quarter, revenue was off 6% to $671.1 million from $710.31 million.

While Disney refuses to break out actual theme park attendance figures, it did say that “sharply lower attendance” at Walt Disney World occurred in both periods. Lower occupancy rates at the resorts and higher expansion costs also took a toll on the operating margins for the quarter and six months.

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