I have a need for knead, and I didn't get it from Steiner Leisure's (Nasdaq: STNR) quarterly report last night.
The company posted a profit of $0.79 a share, well ahead of the $0.67 it earned a year ago. Meanwhile, revenue fell by 8.5% to $123.7 million. If the disparity is puzzling, it's because the company pegs $3.5 million in pre-tax net income as a result of the strengthening U.S. dollar. Otherwise, Steiner would have come up short on revenue and earnings. Wall Street was braced for a flat showing on both counts.
The company's biggest landlords fared worse on the bottom line. Profitability at Royal Caribbean (NYSE: RCL) fell by 97% during the same three months. Carnival (NYSE: CCL) works on a different fiscal calendar from Steiner, but it, too, benefited from an unusual gain in its previous quarter.
However, both Carnival and Royal Caribbean held up better on the top line than Steiner did. That means that the cruise lines are still filling their ships, but passengers aren't as open to splurging on spa treatments once they're on board.
OK, so investors shouldn't have expected Steiner to be immune to the global economic malaise. It runs spas on 131 cruise ships. It also draws in landlubbers through 50 resort spas for hotel chains such as Marriott (NYSE: MAT), Loews (NYSE: L), Starwood (NYSE: HOT) and InterContinental Hotel Group (NYSE: IHG).
Steiner's pampering ways will remain a fashion victim until the travel industry bounces back. Since it already has deals with most of the major cruise lines -- its primary business -- it's not as if the company has a whole lot of room to expand. It will just have to wait until passengers begin spending more money.
Steiner is one of the earliest Rule Breakers recommendations, because it owns a niche that few dare threaten. It's a logistical nightmare to staff these floating spas, and even cruise lines that have tried to cut out the middleman have come crawling back to Steiner. NCL inked a six-year extension with Steiner earlier this month.
The company's near-term growth prospects are dim, but the stock is trading at just eight times trailing earnings. The company is squarely profitable, and it's likely to remain that way regardless of which way the greenback bounces. In these wavy times, that's practically a lifeboat.
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