Carnival Corp. reported fourth-quarter profits that beat Wall Street estimates as bookings and onboard spending improved on the beleaguered Carnival Cruise Lines brand.
Non-GAAP fourth-quarter net income was $35 million, or 4 cents per share, compared to $111 million and 14 cents in the same period last year.
Carnival Corp. president and CEO Arnold Donald said fourth-quarter earnings were better than expected due primarily to higher cruise fares and onboard spending for Carnival Cruise Lines, which is still recovering from the February fire and loss of power on the Carnival Triumph.
"Accelerated progress in Carnival Cruise Lines' brand recovery had a positive impact on fourth-quarter results," Donald said. "A steady stream of innovative product initiatives, the launch of a nationwide marketing campaign and travel agent outreach program, as well as an industry-leading vacation guarantee fueled the brand's improvement."
For the full year 2013, non-GAAP profit was $1.2 billion, or $1.58 per share, compared to net income of $1.5 billion, or $1.94 per share, for the prior year.
The company said cumulative advance bookings for 2014 are behind the prior year at prices in line with prior-year levels. Since September, booking volumes for the first three quarters of 2014 are running well ahead of last year's levels, albeit at lower prices.
"We are catching up on booking volumes and gaining momentum as we enter 2014," Donald said. "We believe the compelling value we have in the marketplace will continue to stimulate strong demand leading to a solid wave period. We continue to expect revenue yields to turn positive in the second half of 2014 compared to the prior year."
In a conference call with financial analysts, Donald said the recent executive realignment is leading to more "collaboration and cooperation" between the brands, which for years have operated independently. "With over 100 ships and more than 10 million guests, we have a scale advantage that cannot be replicated in this industry," Donald said. "We are aggressively seeking opportunities to leverage that scale to drive top-line improvement and gain cost efficiencies."
CFO David Bernstein said cost-savings are being realized by collaborating in areas such as ports, procurement and inventory management. As an example, Bernstein said the corporation, which includes 10 brands, was using more than 70 vendors for commercial printing.
Now that has been pared down to just a handle, "saving millions of dollars," which is especially significant because Carnival Cruise Lines recently began printing brochures again. "Things like that will bode well for 2014," he said. "There are lots of different examples that add up to millions of dollars."
As for the recovery of the Carnival Cruise Lines brand, Arnold said companies generally take two to three years to rebound after a major disruption such as the Carnival Triumph incident. But thanks to the $25 million advertising campaign launched in September, Carnival is experiencing "accelerated recovery," he said.
But executives are remaining "cautious" especially considering the huge growth in capacity in the Caribbean. "But certainly the Carnival recovery is a little ahead of the two- to three-year recovery."
Costa, the Italian brand, is taking more time to rebound from the Jan. 13, 2012, sinking of the Costa Concordia, due in part to the economic woes across much of Europe. "We are seeing a lift in yields and occupancy in Costa," Arnold said. But the recovery may take longer than the two- to three-year norm."
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