Jennifer Rankin, The Guardian, September 17, 2014
Thomas Cook has been hit by weakening consumer confidence in Germany, as political uncertainty weighs on its crucial continental Europe business.
The travel agent said German holiday bookings had slowed down, "reflecting a less optimistic consumer climate due to geopolitical events, as well as a more subdued economic outlook as the EU considers adopting further sanctions against Russia".
Bookings in its Airlines Germany business were up on last year, but average sale prices were 3% lower because of fierce competition in the market for short and medium-haul summer flights.
Thomas Cook earns almost half its annual revenues from selling package holidays in continental Europe (excluding Scandinavia) while a further 14% comes from Airlines Germany.
The world's oldest travel agent – its first tour was a railway trip to a Loughborough temperance meeting in 1841 – has embarked on a turnaround plan under chief executive Harriet Green, following its near collapse into bankruptcy two years ago.
Green said the "successful transformation of our company continues", while informing investors that the company expects full year earnings before interest and tax to fall to between £315m-335m.
A Reuters poll produced an average earnings forecast of £327m. Some market watchers who had taken a more bullish view warned they would have to lower their expectations.
"Thomas Cook's update is disappointing given that we will have to downgrade our forecasts, however the turnaround strategy continues despite the impact of recent weak trading in Germany and Airlines Germany," analysts at Shore Capital said in a note.
The company update sent its shares tumbling more than 6%, to 122p. These latest share price falls follow a minor sell-off in Thomas Cook on Monday, after larger rival Tui Travel agreed a merger with its German parent company, Tui AG, to create the world's biggest leisure and tourism company.
Set against the slowdown in Germany, Thomas Cook reported strong sales in the UK, which accounts for about one-third of its business. The company said it was encouraged that it had already sold 29% of its winter 2014/15 holidays, with average prices higher than last year.
Thomas Cook wants to increase bookings at its exclusive hotels – accommodation only available to its customers – that tends to be include more expensive four- and five-star offerings.
Green, who said the company was on track for its ninth quarter of profitability, has won plaudits from the City for rescuing the company, by cutting debts and reorganising operations. She oversaw 2,500 job cuts last year – 15% of its workforce – and closed almost 200 travel agents.
The company is now doing more business online, with bookings made on tablet and mobile devices up 60% and 216% respectively since a revamped version of its UK website was launched in May. Bookings from desktop computers were up 10%. A version of this website will now be launched in Thomas Cook's other markets.
This article originally appeared on guardian.co.uk
This article was written by Jennifer Rankin from The Guardian and was legally licensed through the NewsCred publisher network.
