Blame Brexit for Carnival's Sinking Shares

By Asjylyn Loder 

Cruise operator Carnival Corp. was the worst performer in the S&P 500 on Thursday.

One little-noticed culprit: Brexit.

The U.K.'s on-again-off-again exit from the European Union has rattled the region's economy and put consumers there on edge. That makes it tougher for Carnival to attract local customers to those cruise routes.

Carnival unexpectedly announced financial results Thursday morning, saying profits sank 20% in the second quarter. Worse, the company offered a gloomier outlook for growth because of softening demand from customers in France, Italy and Germany, said UBS leisure analyst Robin Farley. More than 25% of Carnival's customers come from Europe, she said.

"This is something that's going to affect them in the quarters ahead," Ms. Farley said.

Carnival's stock fell 7.7% to $48.80 a share.

Competing cruise lines likewise suffered, but not nearly as much. Royal Caribbean Cruises Ltd. sank 3.2% to $118.74 a share, while Norwegian Cruise Line Holdings Ltd. dipped 2.5% to $52.56.

Norwegian likewise sells European tours, but the bulk of its customers for those routes comes from the U.S., making them less vulnerable to Brexit worries, Ms. Farley said.

Brexit isn't the only political worry facing cruise operators. President Donald Trump announced earlier this month that American cruise ships will be barred from going to Cuba, part of his efforts to pressure Havana into abandoning its support for Venezuela's beleaguered government.

Carnival has also taken a hit because of problems with Vista, a relatively new addition to its fleet that has had to alter its itinerary several times because of technical problems.

Other leisure stocks also retreated Thursday. Airlines including American Airlines Group and United Continental Holdings were also among the worst performers in the S&P 500. The Invesco Dynamic Leisure & Entertainment exchange-traded fund, which owns stocks like Walt Disney and Liberty TripAdvisor, slid 0.14% to $43.60 a share.

--Kimberly Chin contributed to this article.

Write to Asjylyn Loder at [e-mail]

(END) Dow Jones Newswires

June 20, 2019 18:16 ET (22:16 GMT)

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