The Flight Centre Travel Group Ltd (ASX: FLT) share price dropped 20% after providing an update regarding FY25.
FY25 trading update
The travel company said that it would provide market guidance at the AGM in November, with profit expected to be heavily weighted to the second half.
Flight Centre said that its trading in the FY25 first quarter was “marginally above” the FY24 first quarter across most key metrics, including total transaction value (TTV), the profit margin and underlying profit. But, the company said it’s currently “too early to draw conclusions” about the potential trading patterns over the full year.
The ASX travel share said it’s seeing similar trends in early trading of FY25 as late FY24, though there is “some inconsistency month to month”.
Flight Centre said the global corporate sector activity was flat during the quarter (according to MIDT). Customer wins are helping drive total transaction value and transaction volume growth in the company’s global corporate business. However, first quarter growth adversely impacted by airfare deflation and downtrading in some large accounts. But, there were “positive early signs for October”.
The company said it’s currently expecting normal industry growth over the full year, with around 4% to 5% growth in Australian outbound travel.
What is Flight Centre doing?
Flight Centre also said it’s continuing to monitor airfare price deflation due to its impact on short-term TTV growth. Solid growth in international ticket volumes in Australia during the first quarter, but is largely being offset by deflation.
The company has an ongoing focus on 2% of an underlying profit before tax (PBT) margin, but overall profit growth is the “main priority”.
Flight Centre said it’s investing for the future, with an aim to grow and gain scale in lower profit margin businesses to help drive future earnings and to capitalise on opportunities that are within the market.
Final thoughts on the Flight Centre share price
The company has sunk significantly today. If this is a cyclical problem then it could be a longer-term turnaround opportunity for the business when economic conditions improve, such as when interest rates fall. But, I wouldn’t be surprised to see this sort of pessimistic update from other companies if the consumer is suffering and not able to spend more.
But, there may be easier ASX growth shares out there to evaluate.
