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Turning around a brand is costly — just ask Carnival Corp.
The cruise giant today reported its fourth quarter earnings, with profits adversely impacted by a 6.5% increase in cruise costs, excluding fuel.
Adverting spend was a drag on earnings. In Carnival’s fourth quarter, which ended November 30, selling and administrative expenses, which includes advertising and marketing, rose 15.9% to $532 million.
These higher costs were driven by increased advertising spend for initiatives such as Carnival’s “Moments that Matter” campaign.
In the fourth quarter, Carnival’s U.S. GAAP net income, which included $31 million in unrealized gains from fuel derivatives, came in at $66 million versus $93 million a year earlier.
And, Carnival’s fourth quarter revenue, driven by higher-than expect ticket prices and increased onboard spending, rose a paltry 2.2 percent to $3.65 billion.
Passengers were shelling out more money during sailings as onboard and other revenue climbed 3.9% to $929 million in the fourth quarter.
CEO Arnold Donald acknowledged that 2013 was a “challenging year” for Carnival Corp., although he pointed to the bright spots.
“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.”
There are indeed headwinds, however.
In outlining its full-year 2014 outlook, Carnival reported that advance bookings for 2014 are behind the same period in 2013, and at similar prices. And Carnival can’t be helped by ongoing concerns about safety on its ships, as well as PR challenges to its brand positioning.
Since September, booking volumes for the first three quarters of 2014 are picking up and overtaking last year’s levels, albeit at lower prices.
For full year 2013, which ended November 30, Carnival saw U.S. GAAP net income decline 16.9% to $1.08 billion on revenue of $15.45 billion, which was down slightly.