Marriott Profit Tops Wall St. Forecasts
Cost Cutting Boosts Firm in Slowdown
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Friday, April 24, 2009
Marriott International said yesterday that it recorded a first-quarter loss of $23 million, but its adjusted earnings beat Wall Street's predictions and the firm's shares jumped more than 12 percent.
The Bethesda company had earned $122 million in the same period a year ago, but the global slowdown in travel, which has hit both the leisure and business segments, has battered hotel companies. Marriott's revenue per available room, a key measure of a hotel firm's strength, fell nearly 20 percent for company operated properties.
However, analysts said Marriott investors focused more yesterday on the company's adjusted operating results, which suggested Marriott had been successful in drastically cutting costs and offered some signs that the industry could be stabilizing. Investors sent the firm's shares up $2.41 to close at $22.00. Marriott has traded as low as $11.88 in the past 52 weeks.
Excluding $129 million in restructuring and other charges, Marriott's first-quarter net income was $87 million, or 24 cents per share. Analysts had been predicting about 14 cents per share in income.
Marriott said it slashed its quarterly expenses by 16 percent, to $136 million. It has laid off some employees, cut hours and pay for others, and is reducing operating expenses at hotels by shutting down guest floors and shortening retail hours.
"We are finding new ways of controlling costs and driving revenue," chief executive Bill Marriott said in a statement.
Arne M. Sorenson, the firm's chief financial officer who was recently promoted to president, told analysts during a conference call that there were some reasons for hope.
"We're obviously far from being out of the woods," he said. "However, there are some initial signs of demand stabilization even at today's very low levels."
Still, Marriott officials said revenue per available room, or RevPAR, in North America could fall as much as 25 percent in the second quarter. But Sorenson also said it was "conceivable" that the second quarter will be the low point for year-over-year RevPAR performance. Marriott said it is operating under the assumption that for the full year, RevPAR in North America could fall as much as 20 percent.
"I think what he's saying is that things really aren't getting worse," said Robert LaFleur, an analyst with Susquehanna Financial Group. "What you are seeing in the stock movement is relief that things aren't getting substantially worse."
