Carnival Forecasts Another Loss This Year as Cruise Costs Rise

The cruise sector and other companies across travel and hospitality are facing with higher costs from food, labor, fuel and more. The cruise companies, which issued billions in debt to survive the pandemic, are also getting hit by rising interest rates. Carnival Chief Executive

Josh Weinstein

said Monday the company is positioned to pay down its debt without selling more equity. 

Carnival, whose fiscal year ends in November, said demand for cruises is steadily improving and revenue for the recently ended quarter came in at 95% of prepandemic levels, the narrowest gap since 2020. 

However, the company raised its cost expectations for the year, with executives citing everything from food and advertising to labor and fuel. The company also decided to re-enter a couple of still idled ships into service to meet higher demand.

The company said adjusted nonfuel cruise costs are now expected to rise 6.5% to 7.5% from 2019 levels, up from prior guidance issued in December of a 5% to 6% increase. 

Despite the mounting costs, Carnival said it isn’t seeing any signs that inflation and other financial pressures are weighing on the company’s customers. 

“We have not seen a decline in consumer activity,” Mr. Weinstein said, citing future bookings and the level of spending onboard ships. “Despite the fact that there’s some volatility out there, it hasn’t yet—if it ever does—it has not shown up in our business.”

The company said it expects to post an adjusted loss of 44 cents a share to 28 cents a share for the full year, wider than the loss of 7 cents a share that analysts were expecting, according to FactSet.

“We are working hard to mitigate four years of inflation while still reinvesting in advertising and sales support to build future demand,” Mr. Weinstein said.

Carnival Chief Financial Officer

David Bernstein

said the company raised its guidance around costs because demand has proven so robust. Most of the increase, he said, is tied to higher occupancy. 

“It’s all very good news,” he said. “We are far more confident today than we were back in December.”

Shares of Carnival, down 52% over the past 12 months, fell 4% to $8.84 in afternoon trading.

For the three months ended Feb. 28, Carnival posted a loss of $693 million, or 55 cents a share, compared with a loss of $1.89 billion, or $1.66 a share, in the same period a year earlier. Analysts surveyed by FactSet were expecting a loss of 60 cents a share.

Revenue jumped to $4.43 billion from $1.62 billion a year earlier, above the $4.32 billion expected by analysts, according to FactSet.

Write to Will Feuer at Will.Feuer@wsj.com