Four Seasons Skips Guidance

The Canadian luxury hotel group sees positive start to 2004 but withholds guidance.
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Four Seasons

announced fourth quarter earnings that topped year ago results, driven by a recovery in the high-end hotel market, but missed Wall Street estimates by a penny

The company, which announces results in Canadian dollars, said fourth-quarter net earnings came in at $11.7 million, or 32 cents a share, up from $7.6 million, or 22 cents a share, in the year-ago quarter. In American dollars, using the average quarterly conversion rate, the company earned $8.9 million, or 24 cents a share, which is up from $5.8 million, or 17 cents a share, a year ago.

Excluding all items, the company earned $10.9 million in Canadian dollars, or 30 cents a share. In American dollars, the company earned $8.3 million, or 23 cents a share, which missed Wall Street expectations by a penny. Friday afternoon, shares were off $1.31, or 2.4%, to $54.39.

Revenue came in at $75.2 million Canadian, or $57.2 million American, down 2.2% from the year ago quarter's $76.9 million, or $58.4 million American. The company said revenue per available room, a critical metric called Revpar, rose 11.9% over last year and said this was the first time since 2000 that all regions showed Revpar growth in a quarter.

"2003 ended very differently than it began," said Isadore Sharp, CEO, in a statement. "The second half of the year saw an upswing in travel demand, as signs of economic recovery became clearer, while during the first half of the year travel was severely disrupted as a result of war, terrorism, SARS and economic uncertainty? As travel demand trends continue to improve, we anticipate a stronger financial performance in 2004."

Indeed, the company said that trends had improved in early 2004, despite being a seasonally weak time. Revpar for January was up 8% over last year, with its European and Middle Eastern seeing the largest gains, because travel a year ago was depressed as war loomed in Iraq. But while Four Seasons made positive comments, the company declined to give specific earnings per share guidance, telling investors it "expects its business model to perform at or above industry levels consistent with past experience."

But while Four Seasons was optimistic, saying that demand for hotels was at or above market occupancy levels at most locations, operating margins were impacted by higher costs for labor, health benefits and insurance. Four Seasons warned that this will continue to be a problem in 2004.

"The Company expects that further significant cost increases, particularly relating to energy, insurance and workers compensation, will continue to put pressure on gross operating profit performance in 2004," it said.

In order for gross operating margins to remain at current levels, Four Seasons said Revpar would need to increase between 4% and 5% in 2004, which is relatively in line with current analyst estimates.