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Ahead of the Bell: Walt Disney

Analysts said Friday a weak economy and softening consumer spending are crimping theme-park attendance for The Walt Disney Co., which posted a drop in fiscal fourth-quarter profit that missed Wall Street expectations.
/ Source: The Associated Press

Analysts said Friday a weak economy and softening consumer spending are crimping theme-park attendance for The Walt Disney Co., which posted a drop in fiscal fourth-quarter profit that missed Wall Street expectations.

After Thursday's closing bell, Disney said quarterly profit slid 13 percent, partly because the company had to set aside a cash reserve to handle fallout among its businesses from the bankruptcy of Lehman Brothers.

Meanwhile, attendance slipped 1 percent at its U.S. parks in Anaheim, Calif., and Orlando, Fla. Looking ahead, advance bookings at Walt Disney World through the Christmas holiday period have declined 1 percent so far.

Cowen & Co. analyst Doug Creutz, who rates Disney "Neutral," said a recession is clearly starting to hurt Disney's results.

Creutz expects a softening economy to continue weighing on margins, following a decline in Disney's operating margin for the second straight quarter. Operating margins declined in every business segment, with the exception of cable, Creutz said.

"The domestic parks margin of 13.5 percent was the worst fiscal fourth-quarter performance in at least four years," Creutz wrote in a client note.

Stifel Nicolaus & Co. analyst Kit Spring, who rates the stock "Hold," said consumers "stepped on the brakes" in terms of visiting Disney's theme parks and resorts.

Spring also said Disney is temporarily suspending buybacks, "perhaps indicating that management is not confident that trends won't deteriorate further."

Long-term, however, Spring said Disney still has solid brands and a strong balance sheet.

Disney also owns ESPN and ABC.