Flight Centre hammered on muted trading update

Shares in Flight Centre were hammered to a near two-year low on Friday after it revealed airfare price deflation was taking a toll on short-term total transaction value, suggesting a profit downgrade could be on the cards.

In a trading update, the travel agency said it would wait until its annual general meeting on November 14 to disclose guidance but noted profit was again expected to be “heavily” weighted to the second half of the financial year.

The news was enough to rattle investors, who bolted for the door and left Flight Centre’s stock reeling at $17.37 — down almost 20 per cent to lows not seen since early 2023.

While offering no detailed financials, the company said trading was marginally above results recorded across most key metrics — total transaction value, profit margin and underlying profit — compared with the first quarter of the previous year but it was “currently too early to draw conclusions as to likely trading patterns over (the) full year”.

It also warned that while travel trends were similar to the end of the last financial year, there were “some inconsistency month-to-month.

Global corporate sector activity was flat during the first quarter and it was looking ahead to a seasonally busier trading period with leisure sales under way and corporate travel activity set to increase after the northern hemisphere’s holiday period

But Flight Centre warned first quarter growth had been “adversely impacted by airfare deflation and downtrading” in some large accounts, though there had been positive early signs for October.

Fellow travel companies Corporate Travel and WEB Travel have already issues downgrades.

RBC analyst Wei-Weng Chen said the “incomplete” update hinted at a looming downgrade to consensus profit forecasts for the first-half.

Citi’s Samuel Soew agreed.

“Given the lack of detail we have limited insight,” he said.

“However, it appears there has been a decline in revenue margin, which we imply from the ‘omission’ from commentary.

“We expect share price reaction likely to be soft, however given lack of detail it’s hard to calculate the exact materiality.”