By Sinead Carew
NEW YORK, Nov 25 (Reuters) - Warner Music Group Corp posted
stronger-than-expected quarterly results on Tuesday, helped by sales of albums
from Metallica and Kid Rock, but Wall Street remained concerned about the
company's outlook.
Analysts said they doubted the world's third-largest music company would
be able to cut costs fast enough as revenues fall in the worsening economy.
"Despite a decent earnings performance in the quarter, we remain on the
sidelines with Warner Music shares as we believe the near-term environment will
be much more difficult than the last quarter," said Chris White, an analyst at
Wedbush Morgan.
Warner Music reported that profit rose to $6 million, or 4 cents per
share, for its fiscal fourth quarter ended Sept. 30, from $5 million, or 3 cents
a share, in the same quarter a year ago. Analysts, on average, expected a loss
of 2 cents per share, according to Reuters Estimates.
Revenue fell 1 percent to $854 million. On a constant currency basis,
revenue fell 5 percent.
"Warner's done a very consistent job of improving its market share," said
Pali Research analyst Richard Greenfield. "The larger issue heading into 2009 is
that the rate of decline of the music industry is accelerating. Management seems
to be confident they can reduce costs to offset declines. Is that true even if
revenue declines accelerate?"
Warner increased its share of the music market to 21.5 percent, up 0.5
percent from a year ago, the company said.
But because of the global economic situation and its own music release
schedule, Warner said fiscal 2009 results may look worse earlier in the year
than later.
"The volatile global economy and timing of our release schedule may
result in back-end weighted fiscal 2009 results," said Chief Financial Officer
Steve Macri.
Executives said it was too soon to measure the impact of the cautious
retail environment on Warner's business. They noted that music was relatively
resilient in previous downturns, but said it remained to be seen if that would
be the case this time.
Warner's digital revenue was $167 million, or about 20 percent of the
total in the fourth quarter, barely changed from $166 million in the third
quarter. About 65 percent of digital revenue comes from the United States.
The company said strength in the Japanese market, dominated by mobile
digital music, such as ringtones, and modest gains in Italy and France were more
than offset by weakness in Spain, Germany and the rest of Europe.
It also said sales of ringtones in the United States and Europe were
weak.
Warner Music shares closed up 12 cents to $2.92 on New York Stock
Exchange, after rising as high as $3.44 earlier in the session. The 52-week high
is $9.05, set last May.
(Additional reporting by Yinka Adegoke; editing by Derek Caney and Jeffrey
Benkoe) Keywords: WARNERMUSIC/
(sinead.carew@thomsonreuters.com; +1 646-223-6186)
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