Carnival Posts Smaller Loss on Strong Demand

Cruise operator Carnival Corp on Monday reported a smaller-than-expected quarterly loss and beat estimates for revenue, helped by strong demand for leisure travel, higher ticket prices and strong on-board spending.

Cruise operators like Carnival, Royal Caribbean Group and Norwegian Cruise Lines Holdings are reporting resilient demand from cooped-up consumers undeterred by elevated inflation as COVID-19 pandemic-related restrictions ease.

"We are still experiencing a record wave season, which started early, gained strength and has extended later into the year," Carnival CEO Josh Weinstein said.

Carnival's shares were down about 3% in morning trading as the operator forecasted a larger-than-expected full-year loss, signaling that inflation and rising fuel prices were hurting its profit margins.

U.S. airlines have largely been bullish about travel demand for the rest of the year, shaking off worries of slowing demand and cost pressures. Airline chief executives this month said leisure travels remains strong even though recession fears have sparked concerns about consumer spending.

The Princess Cruises and Holland America Line operator said it experienced the highest-ever quarterly booking volumes during wave season in both North America and Europe for all future sailings for any quarter in its history.

Carnival's occupancy for the first quarter still remained below 2019 levels. The cruise operator expects to regain 2019 occupancy levels this summer.

The company is more than 70% booked for the remainder of the year, Weinstein said.

Carnival appears well positioned to return to cash generation even after accounting capital expenditure and debt financing bills, said Derren Nathan, head of equity research at Hargreaves Lansdown.

"That's not to say it's all plain sailing though, with fuel and currency headwinds still taking some wind out of its sails," Nathan added.

Cash from operations turned positive for Carnival in the first quarter of 2023, with liquidity rising to 8.1 billion.

Carnival brands also face increased competition for web traffic with rival cruise company Virgin Voyages gaining significant share of online traffic in January and February, according to Similarweb, a web analytics company.

On-board and other revenue came in at $1.56 billion and accounted for 35% of the total Carnival revenue in the first quarter.

The company will resume operations in Asia this summer with a ship currently in Taiwan and another in Japan, but has not yet resumed operations in China, which accounted for 1 million guests pre-pandemic, according to the company.

The company posted an adjusted net loss of 55 cents per share in the quarter, compared with estimates of a loss of 60 cents per share, according to Refinitiv.

Revenue rose to $4.43 billion from $1.62 billion a year earlier, beating estimates of $4.33 billion.

The company expects an annual loss between 28 cents per share and 44 cents per share, compared with estimates of a loss of 8 cents.

(Reuters - Reporting by Ananya Mariam Rajesh and Doyinsola Oladipo; Editing by Shounak Dasgupta, Mark Porter, Will Dunham and Josie Kao)