Analyst Note| Jaime M. Katz, CFA |
Full second-quarter results for no-moat Carnival quantified the severity of the shutdown caused by the coronavirus after the firm offered preliminary financial insight in mid-June. With just two weeks of sailings across the quarter, traditional metrics like yields and costs per diem have been rendered worthless. Second-quarter revenue was just 15% of last year’s figure, at $740 million, while costs were nearly 80% of 2019 levels, as expenses to repatriate customers and employees were lofty. Rather than assess the idiosyncratic performance around COVID-19, we’d prefer to ascertain how a slow resumption of demand might occur for Carnival. Details about 2021 demand still support an interest in cruising, indicating that a permanent shift away from the product has yet to occur. As of June 21, about half of Carnival’s guests have retained future cruise credits, 45% of 2021 bookings have come from new guests to the brand, and 55% of 2021 bookings over the last eight weeks have been new bookings. In our opinion, this implies the cruise companies are not solely relying on loyalists, but also on those new to cruising, to sail them out of this downturn.