AN OVERSEAS holiday is no longer considered a luxury and has become for many an annual family ritual, Australia's biggest travel agency, Flight Centre, says.
In stark contrast to the crisis mood gripping retailers, Flight Centre said yesterday it was not experiencing the soft consumer demand that had led to a slump in retail shares.
Announcing a small profit upgrade, Flight Centre's managing director, Graham Turner, said consumers did "not really" consider a holiday once or twice a year as discretionary spending but rather as an "annual ritual" during a long working year.
"Leisure customers are finding compelling reasons to take off overseas, with international air fares remaining highly affordable and the strong dollar delivering a secondary benefit," he said.
Two days after retailer David Jones issued a shock profit warning, Flight Centre forecast a pre-tax profit of between $243 million and $247 million for the full financial year just finished- a rise of as much as 24.5 per cent on 2009-10. It has benefited from the strong Australian currency and the cheap international fares encouraging people to travel.
The guidance is slightly above the top end of the travel chain's previous forecast of $220 million to $240 million. Shares in Flight Centre closed up 18? at $21.40 in a weak market, taking the stock's gains in the past year to about 22 per cent.
Other travel-related stocks did not fare so well yesterday with Wotif.com and Webjet both falling 2? to $4.73 and $1.95 respectively.
An analyst with investment group Moelis, Todd Guyot, said it was not a "ball-tearer result" for Flight Centre but the key drivers of its growth - international fares and the dollar - were likely to continue to be factors.
"The fact that they have been able to come up with a result just above the top end of their [previous] guidance is a pretty good outcome this year - it has been a challenging year," he said. "It is more resilient than some other retail segments."
Flight Centre emphasised that its full-year profit target would be achieved despite the adverse impact on travel demand of the Queensland floods and cyclone, earthquakes in New Zealand and Japan and a recent ash cloud from a Chilean volcano that forced airlines to cancel some services last month.
The travel chain said it would be profitable for the first time in each of the 10 countries in which it operated wholly owned businesses, and that included the US, which had been an under-performer for more than a decade.
Mr Turner said solid growth in international ticket sales in Australia had helped offset the weakness in the domestic leisure-travel industry.
Frequently Asked Questions about this Article…
What did Flight Centre announce in its latest earnings update and profit forecast?
Flight Centre announced a small profit upgrade and forecast a full-year pre-tax profit of between $243 million and $247 million, slightly above its prior guidance of $220 million to $240 million.
How has the strong Australian dollar affected Flight Centre's earnings and travel demand?
Flight Centre said the strong Australian dollar delivered a secondary benefit by making overseas travel cheaper for Australians, helping to boost international ticket sales and supporting stronger earnings.
Why are international air fares important to Flight Centre's performance?
The company highlighted that relatively cheap international air fares are encouraging leisure customers to travel overseas more frequently, which is a key driver of growth for Flight Centre.
How did Flight Centre shares react after the earnings announcement?
After the update, Flight Centre shares closed at $21.40, taking the stock's gains over the past year to about 22%.
Did natural disasters and the Chilean ash cloud affect Flight Centre's results?
Despite adverse impacts on travel demand from Queensland floods and a cyclone, earthquakes in New Zealand and Japan, and an ash cloud from a Chilean volcano, Flight Centre said it would still achieve its full-year profit target.
How are other travel-related stocks performing compared with Flight Centre?
Not all travel stocks fared as well: Wotif.com and Webjet fell after the announcement, trading at $4.73 and $1.95 respectively, according to the article.
What did Flight Centre's managing director Graham Turner say about consumer travel habits?
Graham Turner said many Australians now treat an overseas holiday as an 'annual ritual' rather than discretionary spending, helping to sustain demand for international travel.
What do analysts say about Flight Centre's outlook and resilience?
Moelis analyst Todd Guyot described the result as not a 'ball-tearer' but noted it was a good outcome in a challenging year, saying Flight Centre's key growth drivers—international fares and the strong dollar—are likely to continue and the business is more resilient than some other retail segments.
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