Barbie Takes to High Seas
Gerelyn is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
The entire cruise industry has been working on improving its tainted image since the horrific Costa Concordia tragedy off the Tuscan coast of Italy in January that killed 32 people. The Costa Concordia was a Carnival Corporation (NYSE: CCL) ship but the financial impact from the crash rocked more than just this cruise liner. Rival Royal Caribbean (NYSE: RCL) faced a sea of uncertainty following the accident and wasn't sure the lengths it would have to go to in order to fill its staterooms once again.
Luckily for Royal Caribbean, the worst of the situation seems to have played out for this cruise liner in its past couple of quarters and now CEO Adam Goldstein is saying the Concordia impact is waning, according to CNBC. He wouldn't go so far as to offer any financial guidance for the forthcoming earnings quarter, but he did say that he was "optimistic" about the future.
Indeed, Royal Caribbean is finding new ways to attract customers back to its global fleet without having to aggressively slash its fares. The luxury cruise liner is partnering with Mattel (NASDAQ: MAT) to launch its first ever Barbie cruise extravaganza beginning in January 2013. The toymaker's stock is hovering near a 52-week high even as the holiday season approaches. Nonetheless, Mattel rival Lego, which is based in Denmark and is privately held, executives recently expressed to The Wall Street Journal disappointment in U.S. toy sales in the first half of this year. Shares of the maker of Hot Wheels, however, don't reflect any slowdown. Mattel boasts of a dividend yield of approximately 3.4% and shares have climbed some 30% year-to-date.
Mattel is no stranger to marketing partnerships and has its brand linked to the likes of the wholesome American Girl line, which makes its partnership with Royal Caribbean that much more of a smart public relations move. For its part, Mattel is no doubt gearing up for a holiday shopping season that has received mixed preliminary reviews in an economy where monetary policymakers continue to pour in money to resuscitate growth.
For Royal Caribbean, by trying to win over young girls and families the luxury cruise liner is sending a message that cruises are fun and more importantly safe.
That latter point might be arguable but the company's decision to raise its quarterly dividend by two-cents a share to 12 cents does show that Royal Caribbean has some excess profits to play with and they have decided to return that cash back to shareholders. The stock has climbed more than 25% since the company reported its 2Q results in July and is up double digits in September alone. If there is more recovery ahead for this company as Goldstein hinted toward the stock seems poised for more gains.
The dividend hike is favorable but Royal Caribbean's recovery is still facing some rocky seas. The macro-economic effects from Europe are a drag on business exacerbated in the travel industry by rising airfares and Royal Caribbean is not immune to this.
Carnival, which bears much of the responsibility for the slowdown in cruise travel, continues to hover at about a 52-week high despite the millions of dollars in damages being sought by passenger lawsuits. The company just named Pier Luigi Foschi, Costa Cruises chairman and former CEO until he resigned from the latter post in July, to spearhead its Asian growth strategies. Royal Caribbean similarly has plans to expand in Asia, primarily in China although those intentions were set prior to the economic and industry fallout that occurred in Europe.
Royal Caribbean's attempt to return innocence to the luxury cruise industry by hiring Barbie for the trip probably won't hurt. It's not the first cruise line to incorporate a children's theme with the cruise experience as it joins the ranks of family-oriented Disney and Viacom-owned Nickelodeon. Unfortunately, this generation's Titanic experience is still fresh in the minds of many would-be cruisers and for every returning cruiser who will come back to the high seas there is a potential first-time passenger who is going to be that much harder to win over.
GerelynT has no positions in the stocks mentioned above. The Motley Fool owns shares of Mattel. Motley Fool newsletter services recommend Mattel. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.