Although fourth quarter sales were down slightly, Marvel sales for the year were up 16% (to $347.6 million) and operating margins rose strongly from 27% to 48%. With those kind of numbers and a stock split why is Marvel's stock down some 8.23% this afternoon on a volume of almost 5 million shares? Well the overall market is down today (in part due to the bombings in Iraq), but the real reason that Wall Street wasn't diverted by Marvel's stock split was a revised per share earnings guidance for 2004 of $1.23 to $1.37 per share, well below the $2.01 earned in 2003. The chief reason behind the lower expectations for 2004 provided by Marvel was an increase in tax brackets from 36% to 41%--the inevitable result of success in business.
Even though earnings will be affected by increased taxation, Marvel has raised its expectations for 2004 revenue from an initial estimate of $415 to $435 million to a range of $420 to $435 million, largely because of anticipated licensing and toy revenues from Spider-Man 2. In 2003 Marvel's licensing revenues nearly doubled for $79.6 million to $189.2 million, but operating margins for licensing decreased from 87% in 2002 to 74% in 2003 due 'to a higher percentage of revenues that required sharing with the studios' -- note that Marvel won't be sharing merchandise revenue with Lions Gate in its most recent movie deal (see 'Marvel Expands Relationship With Lions Gate'). Marvel is still looking to licensing as the key to its success in 2004, stating: 'Marvel continues to expect that the primary drivers for 2004 will include Spider-Man consumer product merchandise and increased penetration in international licensing.
Though Marvel now sees itself as more of a licensing entity than a publisher, its publishing revenues grew nicely in 2003 to $73.2 million (from $64.5 million in 2002). Marvel's approximately 65 monthly comic titles averaged a circulation of 55,000 in Q4 2003 versus an average circulation of 45,000 in Q4 2002.
Toy sales were down largely due to a decline in sales of action figures and accessories based on the first Spider-Man movie, which dipped from $27.5 million in Q4 2002 to $11.3 million in Q4 2003. Sales of Lord of the Rings figures were up to $12.8 million in Q4 2003 (from $9.6 million in 2002), but it wasn't enough to offset the decline in Spider-Man toy sales.