Spending slump hits Flight Centre

 

Flight centreTravel agency, Flight Centre, has cut its profit forecast as slumping consumer confidence causes a drop in holiday bookings.

The news caused the company’s share price to fall, and analysts say other companies exposed to consumer spending are feeling similar pain since the federal government handed down its budget.

Flight Centre’s Australian leisure travel business continues to grow and increase market share, but in recent months has not achieved the high levels of growth it recorded earlier in the financial year, MD Graham Turner said.

“This slowdown in growth was most evident in May and corresponded with the widely reported decline in consumer confidence in Australia,” he said.

Lower consumer confidence has been linked to the release of the federal budget on May 13, and has already resulted in profit forecast downgrades from retailers including Pacific Brands and The Reject Shop.

Flight Centre now expects its underlying profit before tax to be between $370 million and $385 million in the year to June 30, at the lower end of its previous guidance range.

Its shares dropped by one per cent in early trade, but by 1030 AEST had recovered to be 30 cents lower, or 0.65 per cent, at $45.60.

Flight Centre’s profit warning shows no one in the discretionary retail space is safe, OptionsXpress market analyst Ben Le Brun says.

“A potential downgrade-a-thon may be in the offing over the next few months,” he said.

“On the evidence, May seems to be where the pain has stepped up a notch and a lot of that would have to do with the handing down of the federal budget.”

Retailers including Myer, Super Retail, Kathmandu, and Premier Investments are likely to experience continued pressure in their share price in the short term, or until they delivered profit warnings of their own,  Le Brun said.

AAP

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