Cheap TicketsCheap Tickets Inc.'s second-quarter profit dropped to only one-fourth of the net for the year-earlier quarter, it announced today. The latest profit was $1.2 million, or 5 cents a share, down from $4.9 million, or 21 cents a share in the second quarter of last year.
The isle-based travel discounter
also says it will close all its retail
stores but the one on Kapiolani
By Russ Lynch
The result was in line with the warning the Honolulu-based seller of discount travel issued June 25, saying it would likely earn 4-5 cents a share, well below analysts' estimates of 21-22 cents.
Although the earnings were not reported until after the Nasdaq exchange closed, Cheap Tickets shares took a dive in late trading to close at $10.95, down $1.50 or 12 percent.
The company also said it will close its retail travel shops, except for its original kiosk across from the Hawaii Convention Center on Kapiolani Boulevard, where the company got started in 1986.
Cheap Tickets will close a Maui store, two in the San Francisco Bay area and others in Seattle and Los Angeles, as well as Burbank and Fullerton, Calif. Together they employ about 50 people. They will close by Aug. 16, the company said.
The retail stores do only about 2 percent of the company's business, according to Cheap Tickets, with the rest coming through the Internet and telephone call centers the company has across the country, including one that opened in Tampa, Fla., July 24 with 150 employees.
The company reported revenues of $28.5 million for the latest quarter, down 4 percent from $29.6 million in the year-earlier period. Gross bookings were up 21 percent at $232.8 million, from $193.1 million. That marks the total received for all types of tickets, including those sold on behalf of airlines, for which Cheap Tickets keeps only a commission.
The biggest cause of the earnings shortfall was a lower ratio of non-published fares to published fares. Non-published fares are for the seats Cheap Tickets buys from airlines at low prices because flight time is approaching with the seats unsold. The profit margin on those tickets is higher than on tickets Cheap Tickets sells for published fares.
In the latest three months, Cheap Tickets had $101.3 million in gross bookings at non-published fares, down 9.5 percent from $119.9 million in the year-earlier quarter.
Second-quarter gross bookings from published fares were up 79.6 percent at $131.5 million, from a year-earlier $73.2 million.
As the company said in its earlier warning, the shift in the sales mix was due mainly to technical errors on its Web site, a decline in its ability to deal with telephone bookings as its call volume rose, and airline fare sales that cut into its competitive edge.
Cheap Tickets works directly with some 50 airlines to sell their slow-moving seat inventory at nonpublished fares. It also sells regularly published fares on hundreds of airlines and in recent years has expanded into other travel services, such as cruises, hotels and rental cars. In the latest quarter it did 42 percent of its sales through its Web site, www.cheaptickets.com.