Hotel and leisure company Starwood Hotels & Resorts Worldwide Inc. reported a better-than-expected 16.4 percent drop in second-quarter profit on Thursday, although the company then cut its outlook for the full year on weakening lodging demand.
In morning trading, Starwood shares fell $3.25, or 8.2 percent, to $36.57. During the past 52 weeks, the stock has dropped from a high of $74.05 last July to touch a low of $30.26 last week.
Net income for the three months ended June 30 fell to $105 million, or 56 cents per share, from $145 million, or 67 cents per share, in the same period a year earlier.
Excluding special items, earnings totaled 56 cents per share, compared with 82 cents per share the prior year.
Analysts surveyed by Thomson Financial, on average, forecast earnings of 52 cents per share.
International demand remained solid for the company, but it dropped significantly in the United States in May, said Starwood CEO Frits van Paasschen.
Starwood said revenue per available room increased 9.6 percent at comparable hotels worldwide and 3 percent in North America. Revenue per available room, also known as revpar, is a key gauge of a lodging company's performance.
The company said it is still bullish on its long-term growth, planning more than 120,000 rooms including almost 60 percent outside the United States. It signed 37 hotel management and franchise contracts representing approximately 9,000 rooms in the second quarter of 2008.
Starwood reduced its full-year earnings outlook, however, as it lowered revpar expectations for both the company's North American and international properties.
The company now predicts earnings to range from $2.17 to $2.32 per share before special items for fiscal 2008. Analysts forecast earnings of $2.44 per share.
Starwood said its outlook assumes 6 percent to 8 percent worldwide revpar growth at company-operated hotels open for at least one year and 2 percent to 3 percent growth at branded North American hotels open for at least one year.
In April, the company lifted its full-year earnings guidance to a range of $2.40 to $2.58 per share. That previous outlook assumed higher worldwide revpar growth of 8 percent to 10 percent and growth between 4 percent and 6 percent in North America.
During the second quarter, Starwood opened 21 new hotels and resorts, including the W Istanbul in Istanbul, Turkey, the Sheraton Huizhou Beach Resort in Guangdong, China, and three aloft hotels. Thirteen properties were removed from the system during the quarter.
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