Flight Centre drops guidance, shares plummet

Travel specialist retailer Flight Centre has amended its previously stated profit guidance for the remainder of the 2019 financial year after poor conditions in Australia’s leisure market impacted its performance.

The group now expects to see a profit of between $335 million and $360 million for the 12 months to June 30, 2019, below the $390 million to $420 million range it put forward last October.

The $347.5 million mid-point in this range represents a 10 per cent decline on the $384.7 million earned during FY18.

The news pushed shares in the travel retailer down 12 per cent, falling to $38.73 per share.

“Our FY19 results will highlight the challenges we are addressing in Australia but will also underline two of our great strengths – our emergence as a world leader in corporate travel and our changing earnings profile,” Flight Centre managing director Graham Turner said.

“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.”

Turner noted the business is on track to earn record profits in its US and UK businesses, with the US poised to become the second largest segment after Australia, and more than half of the group’s profit to be generated internationally for the first time.

He also outlined Flight Centre’s strategy to counter the declining leisure market – namely a three-pronged focus on mass, premium, and youth travel.

Additionally, an accelerated expansion into newer models outside of its traditional bricks-and-mortar offering will sit at the centre of the brand’s plans globally.

Investing in corporate travel, such as through its recent acquisition of the Upside Travel Company, has the potential to disrupt traditional players in the large and fragmented SME market.

“Short-term results will be below our initial expectations and there is further work to be done, but there are also some promising signs for the future,” Turner said.

“Out strong growth trajectory in both corporate and global travel is evident and we are implementing solid plans to address issues in the Australian leisure business in both the near and longer term.”

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