What does Flight Centre do?
Flight Centre Travel Group Ltd [ASX:FLT] is a travel retailer with operations around the world. It operates under a number of different brands, including Flight Centre, Escape Travel and Student Flights.
What’s happening to FLT’s share price?
Today, FLT reported first-half earnings, with the company downgrading full-year earnings guidance due to heavy discounting of international airfares and adverse foreign-exchange movements. The stock price fell sharply on the news, but recovered as the day went on. By the afternoon, FLT’s stock was down nearly 3%.
What now for Flight Centre Travel Group?
This is the fourth profit downgrade from FLT in the past two years. Clearly, its business model (with a retail shop presence) is under pressure.
FLT is basically a middleman, and the internet is taking revenue away from these types of businesses.
You can see that in the chart below. FLT has seen its share price decline over the past two years, from a high of around $47.50 to below $30 today.
That tells you the business model is struggling for relevance in a world where more and more people book their holidays online, cutting out the middlemen.
As the share price remains in a downtrend, and the pressure on profit growth continues to weigh, I wouldn’t be buying FLT at these prices, despite the prospect of it looking ‘cheap’ after such a prolonged share-price decline. Avoid.
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Editor, Money Morning