Home / Sector / Travel Shares / Why did the Flight Centre share price just plunge 9%?
Investors are punishing the Flight Centre share price on Wednesday. But why?
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Bernd Struben earned his BA in economics from the University of Michigan in 1991, with post-graduate studies in environmental economics at the University of Connecticut. Over the years he’s written about and analysed the tourism industry in the Caribbean; Europe’s commercial real estate markets; and, since moving to Australia in 2010, global and Aussie share markets. Bernd studies geopolitical and macroeconomic trends, alongside sector and company specific data, to gauge what he believes could be tomorrow's best investments. In his free time, you might find Bernd at the beach with his family or working on his next science fiction novel.
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| More on: FLT
The Flight Centre Travel Group Ltd (ASX: FLT) share price is taking a tumble today.
Shares in the S&P/ASX 200 Index(ASX: XJO) travel stock closed yesterday trading for $23.01. In morning trade on Wednesday, shares are changing hands for $21.04 apiece, down 8.6%.
For some context, the ASX 200 is down 0.3% at this same time.
This comes after the company amended its 2024 financial year (FY 2024) profit guidance.
Investors are bidding down the Flight Centre share price after the ASX 200 travel stock released an amended and reduced profit before tax (PBT) guidance in the range of $316 million to $324 million.
Flight Centre noted this excludes the roughly $4 million in trading losses for the Discova Central Americas (DCA) destination management company, which Flight Centre decided to close.
Those losses were not excluded from Flight Centre's previous FY 2024 guidance as the DCA business was still under review at that time. Excluding those $4 million in trading losses, previous guidance would have been for a $304 million to $344 million in underlying PBT.
The company also said it expects FY 2024 total transaction value (TTV) of around $23.7 billion. That's up $1.7 billion from FY 2023 and in line with Flight Centre's record FY 2019 result. This was achieved despite significant airfare deflation during the year.
Underlying profit margin is forecast at 1.3% to 1.4%, up from 0.6% last year.
What did management say?
Commenting on the amended guidance pressuring the Flight Centre share price today, managing director Graham Turner said:
While market conditions were challenging during FY24, we again delivered solid TTV growth as customers prioritised travel over other areas of discretionary spend. Year-on-year growth rates were, however, adversely impacted by the Indian wholesale foreign exchange business's closure (FY23: $360m TTV) and significant airfare price deflation during the 2H…
While this has slowed our TTV growth, we welcome this deflation and believe it is a potential tailwind in the months ahead, given it is likely to stimulate further demand for international travel.
Addressing the company's profit and revenue margins, Turner added:
We expect further improvement in these key metrics in the near-term, particularly as the corporate business's productive operations initiative – a body of work that we have invested significantly in during FY 2024 to deliver future productivity and service benefits – gains traction.
Flight Centre will report its full FY 2024 results on 28 August.
With today's intraday losses factored in, the Flight Centre share price remains up 3% year to date.
