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.
