Disney’s Retail Division on Tear, Thanks to ‘Millionaire’

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Executives at Walt Disney Co. aren’t thanking Santa Claus for their happy holidays. Instead, they’re grateful to Regis Philbin and Buzz Lightyear.

Disney officials are being typically coy about holiday revenues generated by DisneyStore.com, the Disney catalogue or the brick-and-mortar Disney stores.

But industry watchers believe that the long-stalled retail products division found some traction this Christmas season, thanks to items connected to the wildly popular “Who Wants to Be a Millionaire?” on ABC and the hit film “Toy Story 2.”

In fact, the “Millionaire” CD-ROM game set a record for selling more units in a single month than any other personal computer game in history, according to PC Data. The CD-ROM, priced around $20, sold more than a million copies during December.

Right behind it in popularity was the “Toy Story 2” video game, which ranked seventh on PC Data’s list of the month’s bestsellers.

At the beleaguered brick-and-mortar Disney Stores, officials say they reached their holiday sales goals, though they declined to give specifics. Among the more popular items were the Princess series of costumes targeted at girls between the ages of 3 and 6, and what was widely considered to be the hot toy of the Christmas season the cowgirl Jessie doll from “Toy Story 2.”

“We’re no longer going to have our head in the sand when it comes to where the marketplace is,” said Doug Murphy, general manager of Disney Stores in North America. “Girls and infants are a huge opportunity for us (but) we’re making sure we address the other key guests not just kids but adults. We have a whole bunch of stuff to offer adults, like picture frames and snow globes. We need to focus on that.”

As long as Disney keeps producing popular films and TV content, merchandise sales should grow in step, according to a report by Jill Krutick, an analyst at Salomon Smith Barney.

“As an entertainment company, Disney’s results are inherently dependent on the delivery of ‘hit’ content,” Krutick wrote. “To this end, Disney is benefiting from the success of ABC’s successful program ‘Millionaire.’ As we have noted in the past, a single hit show can help drive ratings for other television programs and could serve as a building block for a resurgence of the ABC broadcast network. Disney should also reap the rewards of ‘Toy Story 2,’ which already has grossed over $230 million at the U.S. box office.”

Disney stock has been on a tear since the holidays. Last week it was trading at around $37, up from its Dec. 1, 1999 close of $28. Of the 25 analysts covering Disney, 13 now rate it as a “hold,” 10 as a “moderate buy,” and two as a “strong buy,” according to Zacks Investment Research.

For the fourth quarter ended Dec. 31, revenues for Disney’s consumer products group were actually down 6 percent from the like period a year earlier and operating income was down 29 percent. But those declines would have been even worse were it not for improvements at Disney Interactive, led by the “Millionaire” and “Toy Story 2” games.

Overall, Disney reported net income for the quarter of $515 million (25 cents per share), compared with $622 million (30 cents) for the like period a year ago.

“A lot of the (product line) restructuring programs really haven’t kicked in yet,” said analyst Suzanne Betts of Pittsburgh International. “Whatever they got out in December wasn’t enough to make up for the year. I think we’ll start seeing the results on that in the second quarter.”

One of these restructuring programs was announced in November, when Disney said it would start releasing more of its video library on DVD. So far, the DVDs for “Tarzan,” “Pinocchio” and “The Little Mermaid” have been Disney’s strongest sellers.

In terms of popularity, things seem to be going well for members of the Go Network, which ranked sixth overall among all Web sites in the number of unique visitors, according to Media Metrix. During December, the e-commerce and entertainment sites that comprise the site attracted more than 21 million visitors.

A survey by Ernst & Young LLP of almost 1,300 online holiday shoppers revealed that the average amount spent at the Disney Store online was $172, ranking it fourth among all the e-commerce companies cited in the survey.

“We did very well and we exceeded our expectations,” said Russ Gillam, senior vice president of Disney Direct, which includes the Disney catalog and online store. “The numbers we have made public is that were are about 300 to 400 percent growth in sales over last year Unlike other e-merchants that had trouble satisfying customers, we had record fulfillment rates and we had guaranteed Christmas delivery through Dec. 22.”

But when Disney released its fourth-quarter earnings, the company excluded the results from the Go Network. Those earnings are expected to be released this month.

“Go.com will, as has been expected, report a substantial loss for the quarter, reflecting in part significant intangible asset amortization,” according to a release. In fact, Disney is in the midst of tightening the focus of its lagging Go.com site on entertainment and leisure.

Staff Reporter Nola Sarkisian-Miller contributed to this story.

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