'Mars Needs Moms' Hurts Disney as Quarterly Profit Drops 1%

"Mars Needs Moms"
Walt Disney

UPDATED: The poor performance of the animated film contributed to the profit fall, despite rising revenue.

The poor performance of Mars Needs Moms helped contribute to a 1 percent profit decrease at Disney in its fiscal second quarter, despite rising revenue, the company said Tuesday.

Disney reported net income of $942 million on revenue that grew 6% to $9.1 billion.

Its largest segment, media networks, was the standout performer, with operating income that grew 17 percent to $1.5 billion on revenue that was up 12 percent to $4.3 billion.

Its weak link was the film studio, which reported operating income that shrunk 65 percent to $77 million on revenue that was off 13 percent to $1.3 billion.

Beyond Mars Needs Moms, which took in $37 million worldwide on a $150 million budget, Disney blamed weakness at the studio on difficult comparisons. A year ago, after all, Alice in Wonderland was in worldwide theatrical release, and Toy Story and Toy Story 2 were selling well on DVD and Blu-ray disc.

The other three segments -- parks and resorts, consumer products and interactive media -- each saw some revenue growth. Parks and resorts, though, reported a 3 percent decline in operating income to $145 million, and interactive lost $115 million compared with a loss of $55 million a year ago.

Disney shares rose 2 percent ahead of its earnings report to $43.91 but were off as much as 3 percent in after-hours trading as Wall Street determined the results fell short of expectations.

Zacks Investment Research, in fact, said "the entertainment behemoth posted a horror flick on earnings."

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Zacks expected earnings of 57 cents per share while Disney posted just 49 cents, and revenue missed the firm's projections by $50 million.

Disney's share price, though, has risen 23 percent in the past six months, giving it a market capitalization of $83.4 billion on Tuesday and making it the most valuable of the media conglomerates.

In a conference call with analysts, CFO Jay Rasulo said "the very disappointing performance of Mars Needs Moms" was one of four events impacting earnings. The other three were the devastating earthquake in Japan, a charge associated with Disney's acquisition of game-maker Playdom and the unfortunate timing this year of Easter, which fell in the current quarter instead of the fiscal second quarter.

Disney CEO Robert Iger said four upcoming movies are the "key swing factors for the remainder of the year": Thor, Pirates of the Caribbean: On Stranger Tides, Cars 2 and Captain America: The First Avenger.

Iger also said he's not worried about a negative impact on ESPN from an NFL strike -- should it happen -- because sports fans would "make a mad dash to college football."

Disney's cable networks, in fact, accounted for nearly $1.4 billon, about 77 percent, of the company's overall operating income. ESPN, ABC Family and the various Disney Channels were highlighted as significant drivers of revenue and profit.

Some broadcast and cable TV titles Iger and company boasted of during the conference call or in the company's earnings release included Lemonade Mouth, Criminal Minds, Army Wives and Castle.

Disney's consumer products unit showed a 7 percent improvement in operating income to $142 million due to sales of items related to the movies Tangled, Toy Story and Cars. 

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