Warner Music Group 4th-quarter profit rises

Even as its fourth-quarter profit beat Wall Street expectations, Warner Music Group Corp. Chief Executive Edgar Bronfman Jr. said Tuesday the company was keeping a tight rein on CD shipments ahead of what could be a rocky Christmas season.

"I don't think any of us know what the Christmas shopping season will be," he told analysts on a conference call. "We are managing inventory very, very carefully and we are not over-shipping."

Warner Music, whose artists include Linkin Park and Madonna, said lower income tax expense and increased digital revenue drove its profit for the fiscal fourth-quarter to Sept. 30 up 20 percent, although it still lost money for the full year.

Quarterly earnings climbed to $6 million, or 4 cents per share, from $5 million, or 3 cents per share. Income tax expense was nearly halved to $13 million.

Revenue slipped 1 percent to $854 million from $867 million as consumers shifted toward digital music and digital piracy continued. The company's own digital sales, which make up 20 percent of total revenue, grew to $167 million from $131 million.

The results easily beat the average estimates of analysts polled by Thomson Reuters, who had predicted a loss of 2 cents per share on sales of $837.6 million. Analysts' estimates typically exclude one-time items.

Warner shares rose 22 cents, or 7.9 percent, to $3.02 in midday trading.

Recorded music revenue dropped nearly 4 percent to $707 million, while the unit's digital revenue increased 26 percent to $156 million. Best sellers included releases from artists such as Metallica, Kid Rock, T.I. and Mariya Takeuchi.

Warner said its investment in signing and developing artists paid off as it increased its U.S. market share by 0.5 percentage points from a year ago to 21.5 percent in the quarter.

Standard & Poor's analyst Tuna Amobi kept a buy rating on the stock.

"Despite piracy, we still view digital revenue as key bright spot, though relatively small, amid (a) continued music CD industry sales decline," he wrote in a research note. "Amid retail shifts, we keep a cautious holiday outlook."

For Warner's music publishing division, revenue climbed 14 percent to $156 million as digital revenue surged 57 percent to $11 million.

Warner reported a full-year loss of $56 million, or 38 cents per share, compared with a loss of $21 million, or 14 cents per share, in the prior year. Losses from continuing operations totaled $35 million, or 24 cents per share, compared with a year-ago loss of $8 million, or 5 cents per share.

Annual sales increased 3 percent to $3.49 billion from $3.38 billion.

Looking ahead, Chief Financial Officer Steve Macri cautioned that worldwide economic volatility and the timing of Warner's release schedule "may result in back-end weighted fiscal 2009 results."

One reason the company faced a tough comparison was the sale of 5 million albums of Josh Groban's "Noel" in the fourth quarter last year, he said.