Thomas Cook has attempted to be upbeat despite the slowdown, but investors have decided to bail out of its shares anyway.
The company said in an update that summer trading was finishing strongly thanks to the continued popularity of package holidays and winter trading had improved since its last update. It commented that consumer were still going on holiday, albeit they were tending to book later. But with comments that the worst of the recession was not yet over, along with a smattering of profit taking, the company's shares have fallen 7.8p to 233p. Mark Brumby of Astaire said:
This morning's statement is broadly in line with that of TUI Travel yesterday and should not surprise. Thomas Cook is delivering but 2010 remains an unknown. The group is not planning to cut capacity further but the trend towards later booking and the distinct possibility of a consumer double dip as taxes, interest rates and unemployment rates rise next year means that visibility is very limited. Following the placing of Arcandor's stock earlier this month Thomas Cook is the master of its own destiny and is doing pretty much everything right. However, economic uncertainty and the belief that consumers will scrutinize large-ticket items of expenditure very closely next year lead us to rate the shares a hold.
Panmure Gordon is more positive, sticking to its buy recommendation. It said:
Thomas Cook has successfully managed supply in the face of weakening demand over the past 18 months. It retains the flexibility to adapt to further changes in demand, although significant cuts in capacity are unlikely.
Trading on a PE of 8.5 times to September 2010 and offering a dividend yield of 4.5% we believe the shares are attractive at these levels and we retain our buy recommendation and 310p price target.
