Flight Centre Shares Are Tanking Today

At time of writing, the share price of Flight Centre Travel Group Ltd [ASX:FLT] is the worst performer trading in the ASX today. It is down 11.89%, trading at $38.92 per share.

The travel company issued a profit downgrade in an announcement today.

Flight Centre acknowledged that they are ‘performing strongly’ in the global corporate travel which includes USA, UK and Asia markets. Yet the Australian leisure sector has been struggling mainly because of slow growth, weak retails sales and low consumer confidence.

As they commented on their announcement, in the last two years, the company has:

  • Deployed a new sales system (GDS)
  • Introduced a new wage model for its front-end sales staff
  • Consolidated its brand structures
  • Initiated an ongoing review of its shop network

Yet the changes are yet to pay off.

As you can see below, the stock price has dropped by over 40% since August last year.flight centre

Source: Market Index

As Flight Centre noted on the announcement:

For the first time, businesses outside Australia are expected to generate more than half of group profit and earnings globally will be weighted more heavily towards corporate travel. “While we expect Australian leisure results to improve as short-term operational improvement plans gain traction and as longer-term transformational strategies are implemented, we also expect these trends to continue.[…]

We have started to see some modest signs of recovery in Australia recently, with margins stabilising and customer enquiry growing steadily, but this has not yet converted to increased bookings, which is a trend that has been evident in the past when consumer confidence has been relatively low.

Flight Centre has also been hit with a lawsuit from employees today.

From the ABC :

Former and current staff of travel giant Flight Centre are taking the company to the Federal Court, claiming widespread, systemic underpayment of staff.

Documents will be lodged today on behalf of five people who claim Flight Centre underpaid them for at least six years.

Will the Flight Centre share price recover?

While households have seen some incredible gains in property, they are now seeing their wealth vanish, along with slumping house prices.

Not only that.

We are seeing falling house prices along with stagnant wages and higher costs of living. Households are feeling the pinch.

Record high debt, lower price houses, higher bills and no salary increases mean that households are cutting down on unnecessary spending, and this could mean that Australian leisure travel struggles to recover in the future.


Selva Freigedo,
For Money Morning

Selva Freigedo is an analyst at Money Morning. She has a background in financial economics, but what makes Selva´s experiences different to many are the places she has lived and worked. Born in Argentina, she has also lived in Brazil, the US, Spain, and now Australia. She has seen up close many of the economic phenomena that worry Fat Tail Investment Research readers, like hyperinflation, bank bail-ins and governments burdened with so much debt it cannot possibly be repaid.

Every week, she goes through each article, research note and recommendation produced by our experts around the world to give you information on how to build and protect your wealth. Selva packages the week’s best ideas into one easy to read report: Port Phillip Insider Extra.

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