Mouse warns Wall Street of big Q2 studio loss
Forget the monstrous Tharks — the biggest fight Disney’s “John Carter” has faced has been the intensity of the media’s focus on the sci-fi epic.
The scrutiny of the pic’s mega-budget and underwhelming B.O. performance likely spurred Disney to take the unusual step of getting out in front of the bad fiscal news to warn Wall Street on Monday of a coming operating loss of about $200 million to be taken on the pic in the Mouse’s fiscal second quarter ending March 31. As a result, Disney expects its studio wing to post an operating loss of $80 million to $120 million for the quarter.
“I’m not shocked by this,” said Evercore analyst Alan Gould, although the loss estimate was larger than he and other Wall Streeters had predicted. Earlier this month, before the pic’s opening, Gould anticipated a $165 million write-down.
Based on the pic’s worldwide B.O. tally of $184 million after two weeks, analysts said it was likely that the Mouse decided “to take one more big slam, then move on,” said Todd Juenger of Bernstein Research. Oddly, the hit came exactly one year after the Mouse recorded a $70 million charge for the stop-motion flop “Mars Needs Moms,” which fared far worse at the turnstiles than “John Carter.”
Disney’s statement noted that the studio has high hopes for its upcoming pics, Marvel’s “The Avengers” and Pixar’s “Brave,” which it believes “have tremendous potential to drive value for the studio and the rest of the company.”
“John Carter’s” domestic B.O. was weaker than expected, but it’s international perf has beat consensus. Overall, it was the sheer cost of the pic — about $350 million to make and market — and what Wall Street and industryites agree was an unsuccessful marketing campaign, which relegated the pic to major write-down territory.
Other Disney releases for the quarter included “The Secret World of Arietty,” “Beauty and the Beast” in 3D and ongoing ticket sales from “War Horse,” which was released in December.
Disney took its lumps on “John Carter” a few days before Lionsgate’s hotly anticipated “The Hunger Games” prepares for release this Friday after a long, carefully crafted marketing campaign that has reached fever pitch.
As a standalone studio, Lionsgate has seen its stock rise steadily amid the pre-release buzz for “Hunger Games.” Disney, by contrast, hasn’t taken much of a hit even with “John Carter” generating negative press. Mouse shares closed up 0.58% at $43.44 Monday. They were off 0.78% in after-hours trading following the write-down news.
That’s because while the various threads of how “John Carter” was budgeted, cast, directed or marketed may be a cautionary tale for Hollywood, investors tend to look at other Disney businesses — mainly cable networks and theme parks — for a read on the Mouse’s overall health.
“You’d prefer they would make money and avoid situations like this, but when you are an investor in a company that includes a movie studio, you are going to have hits and projects that don’t work as well, and you have to be prepared for that,” Juenger said.