Thomas Cook Shares Plunge After It Cuts Annual Profit Forecast

Shares of British holiday firm Thomas Cook declined nearly 20 per cent on Monday (24) late morning trade after the company cut its annual profit forecast.

Following a decline in demand, Thomas Cook expects for a full-year underlying operating profit of £280 million, lower when compared to the previous projection of £323m.

The company said hot weather conditions reduced demand for bookings across its vital summer season. People opted to remain in their homes in June, July period causing a decline in the number of customers. The decline in the number of customers extended to August also, forcing the firm to spend more on promotional activities.

“Summer 2018 has seen a return to popularity of destinations such as Turkey and Tunisia. However, it has also been marked by a prolonged period of hot weather across Europe. This meant many customers spent June and July enjoying the sunshine at home and put off booking their holidays abroad, leading to even tougher competition and higher than usual levels of discounting in the ‘lates’ market of August and September,” said Peter Fankhauser, chief executive of Thomas Cook.

“Our recent trading performance is clearly disappointing. However, despite the recent challenges, we continue to make good strategic progress which positions us well to drive further performance improvement; this includes the launch of our Expedia alliance in the UK and Scandinavia, signing our first own-brand hotel in China and lining up a pipeline of 10 new Cook’s Clubs in some of our key destinations for Summer 2019,” he added.

UK tour operator bookings are in line with last year, while average selling prices are up 7 per cent. The slowdown in customer bookings during June and July extended into August, leading to higher than normal levels of promotional activity. This has exacerbated pressure on margins, on top of an already competitive market for Spanish holidays, as previously highlighted, the company said in a statement.

Rising temperatures seen across Europe turned into a headache for travel agencies, firms, and airlines as they witnessed a fall in the number of customers since June.