) recently announced a massive management shuffle, possibly to
fix some persistent operational issues. Per the program, the
cruise operator plans to divide the roles of its chairman and
chief executive officer (CEO).
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While former CEO Micky Arison will only continue as chairman of
the board, Arnold W. Donald who has been on Carnival's board for
the past 12 years will take up the mantle of CEO, effective Jul
The decision puts an end to Arison's 34-year long career as CEO
with Carnival. During his leadership, Carnival was
transformed from a privately-held entity to a public company and
crowned as the world's largest cruise operator. However, in his
role as chairman, Arison will continue to supervise the
operations of the company.
He had also conducted a big-ticket merger with P&O Princess
Cruises plc. In a nutshell, under his supervision, Carnival grew
from generating $44 million in revenues to a $15 billion company.
However, of late, Carnival's ships have been facing one accident
after another, which sharply lowered its bookings. The negative
publicity generated as a result of the mishaps and soft economic
conditions have adversely affected bookings.
Even the adoption of a sharp price discounting strategy could not
meaningfully trigger bookings; rather it pulled down net revenue
yield. Following such issues, Carnival had to lower its fiscal
2013 guidance more than once. In such a scenario, we believe,
Carnival had no other option but to make a drastic move, such as
the appointment of a new CEO, to turn around the company's
The new CEO Donald has previously worked with governmental
organizations, private equity firms and a large publicly traded
company. Donald founded and held a top position at Merisant, a
company that owns tabletop sweetener brands such as Equal and
Canderel. He also assumed multiple senior management roles at
) for around 20 years. At present, Donald is also a board member
Bank of America Corp.
From the time it became a publicly traded company, Carnival's
operating policy has been regulated by Arison. However,
considering Donald's decade-old alliance with the company, we
believe, he will be able to do justice to his new responsibility.
Anyways, there is still some time before this management churn
pays off and consumer confidence is restored. Till then, we
remain skeptical about Carnival, which currently carries a Zacks
Rank # 5 (Strong Sell). However, one company, which sells
Sturm, Ruger & Co. Inc.
) is worth considering as it carries a Zacks Rank #1 (Strong