Thomas Cook’s (TCG) 30% share price rally since November 2016 has gone into reverse after issuing a lacklustre trading statement. The travel agent says first group sales are flat with bookings 1% higher and pricing 1% lower.
The company says it remains cautious about the rest of the year, given the uncertain political and economic outlook.
The market gives a thumb down to the trading update and the shares fall 8% to 84.65p.
At first glance you may believe the first quarter trading statement is positive.
It has sold 82% of its 2016/17 winter season inventory and summer bookings are 9% ahead of last year with 31% of inventory already sold.
It is also expanding its holding offering to Greece and smaller European destinations as the public seeks alternative sun spots to traditional places like Egypt and Turkey whose popularity has fallen in light of terrorist activity.
Look a bit closer and you may start to understand why the stock market has reacted negatively to the trading update.
HERE IS THE BAD NEWS
Thomas Cook said on 23 November 2016 that it had sold 20% of summer 2017 inventory. This impressive start to the season seems to have waned, given the season’s bookings have only risen to 31% in two and a half months.
Northern Europe sales are trading behind last year with bookings down 1% and pricing down 3%.
UK package holiday bookings are down slightly year-on-year, having been up 4% in November 2016.
ONE ANALYST SAYS 'SELL'
‘Intense competition for Spain is leading Thomas Cook to push quality (margin) over growth,’ says Panmure Gordon analyst Mark Irvine-Fortescue.
He has a ‘sell’ rating on the stock and 75p price, saying the stock feels fully priced.
‘Bulls are talking up the advantage for tour operators (versus independents) from securing hotel inventory at better euro currency rates. The logic is sound, but we are wary of over-egging expectations, given a tendency for Thomas Cook to compete away such tailwinds,’ he comments.
