By Michele Kayal
Advertiser Staff Writer
Tweaking by discount travel provider Cheap Tickets pushed fourth-quarter earnings down 34 percent from 1999, the Honolulu-based company said yesterday, but yearly gains were up as the company laid the groundwork to try to become the industry leader.
Net income for the quarter ended Dec. 31 was $534,000, or 2 cents a share, compared to $807,000 or 3 cents a share, for the same period in 1999.
The period marked the companys eighth consecutive profitable quarter. Analysts had forecast a per-share profit of 1 cent.
Company executives attributed the slide to "an experiment" that tinkered with the companys Web site display and tested out yield and profit initiatives that may have put off some buyers.
"We went a little too far, and it negatively impacted our growth," said Cheap Tickets chief executive Sam Galeotos. "We have adjusted them, and the results have shown positively as we entered January. … The good side is we know what we can and cant do on profit enhancement and yield management."
The company released its earnings report after the stock market closed yesterday. Company shares closed at $11.52, down 3 cents. They have fallen 34 percent in the past year.
Net income for 2000 was up 58 percent to $12 million, or 51 cents a share, from $7.6 million, or 31 cents a share, in 1999. Analysts had expected 2000 profits oft 49 cents a share.
Cheap Tickets executives signalled yesterday that they expect 2001 to be a strong year, with gross profits roughly 1.5 percent higher than in 2000, and earnings per share in the 58-cent range.
To help growth, the company plans a $20 million marketing campaign with J. Walter Thompson that will emphasize its Web site and focus more heavily on television advertising. Technology upgrades will allow e-ticketing functions from the Web site, new fare search options and enhanced customer service.
"Our vision is to be the leading distributor of discount leisure travel in North America," Galeotos said.
Cheap Tickets introduced e-ticketing at its call centers in November, and plans to extend that feature to its Web operations in the first half of 2001, the company said.
Galeotos said the company has not found an appropriate investment opportunity in Europe and will temporarily shelve its plans for expansion there. Cheap Tickets also will husband $141 million it has in cash, Galeotos said, in anticipation of possible acquisitions in 2001.
"Were looking at things that will help accelerate our growth and expand our product line and position us to be the leader in the discount leisure travel market," Galeotos said. "Were looking at like kinds of companies that can help us achieve growth and that we can get synergies out of."
Wall Street analysts said they were pleased with the companys results and would look for more growth this year.
Fourth-quarter revenue rose 16 percent to $18.4 million, Honolulu-based Cheap Tickets said.
In a separate announcement, the company named Samuel Horgan chief financial officer. Horgan has 25 years of experience in international financial management and mergers and acquisitions, the company said.