Issues@Hand
AFA initiatives, Christian activism, news briefs
November-December 1998 – The Magic Kingdom may not be crumbling, but The Walt Disney Company may be losing its magic touch nonetheless. For the fourth quarter of 1998 (ending September 30), Disney’s earnings were down 31%, following a 2% drop in profit for the third quarter.
While Disney’s 1998 growth performance will probably exceed 1997 by 8%, that is still far below the expected 15%-20% the company normally demonstrates. A growth rate of 20% has been the yearly goal that Disney Chairman and CEO Michael Eisner has come to expect.
AFA President Donald E. Wildmon said, “We knew from the beginning that this was going to be a protracted boycott effort. This is a long-distance endurance run, not a sprint. As more people learn what this boycott is all about, more will join, and the financial pressure on Disney will continue to mount.”
Disney’s weaker financial outlook has already affected its image on Wall Street: its stock has dropped 43% since it peaked last April. That decline included a one-time June 30 stock plummet that was the largest in almost nine years for Disney.
As a result of the company’s financial turbulence, analysts have found themselves forced repeatedly to revise their estimates on the Mouse’s expected performance. According to Daily Variety, Wall Streeters have slashed their expectations for 1998 growth by 12%.
David Londoner, an analyst at Schroder & Co., said his company had already lowered their earnings estimate for Disney, but said fourth quarter performance “was even worse than we thought.”
Another possible indication of the boycott’s influence is that Disney’s problems seem to be unshared by other entertainment industry heavy hitters. In contrast to their more pessimistic rating of the Mouse, Wall Street analysts raised their earnings estimates for Disney’s largest competitors – Time Warner, News Corp. and Viacom. Merrill Lynch analyst Jessica Reif Cohen told Daily Variety that the earnings drop was “very much an individual thing for [Disney] right now.” Even worse for Disney, most analysts on Wall Street expect more financial woes for the Mouse House in fiscal 1999. Cohen said, “It’s clear that with basic earnings lower and the trends continuing… ’99 should be lower than previously thought.”
Lehman Brothers analyst Larry Petrella echoed those sentiments, saying, “Our confidence level for next year is not high.”
Disney claims its profit plunge was primarily the result of a weaker-than-expected performance from its creative content division (film studio and consumer products), with operating income declining 20% from last year. While Disney says its drop in consumer product sales has been driven by the Asian economic crisis, Cohen said the impact of Asia on Disney's poorer performance was not yet clear. 
