Thomas Cook issues 'hot weather' profit warning

Thomas Cook (Frankfurt: A0MR3W - news) has downgraded annual profit forecasts, saying hot weather hurt demand for bookings in its crucial summer season.

The holiday firm said it had endured "tough" trading over the past few months, with the sustained period of higher-than-average temperatures across Europe meaning it had, like rivals, been forced to discount late bookings heavily.

As a result, the FTSE 250 firm warned that underlying operating profits for the year to September were now expected to come in at £280m.

Its previous guidance was for £323m. Shares (Berlin: DI6.BE - news) fell more than 20% on opening while rival TUI (LSE: 0NLA.L - news) was the biggest faller on the FTSE 100, down 3%.

Peter Fankhauser, Thomas Cook's chief executive, said: "Summer 2018 has seen a return to popularity of destinations such as Turkey and Tunisia.

"However, it has also been marked by a prolonged period of hot weather across Europe. This meant many customers spent June and July enjoying the sunshine at home and put off booking their holidays abroad, leading to even tougher competition and higher than usual levels of discounting in the 'lates' market of August and September.

"Our recent trading performance is clearly disappointing. However, despite the recent challenges, we continue to make good strategic progress which positions us well to drive further performance improvement; this includes the launch of our Expedia (Frankfurt: A1JRLJ - news) alliance in the UK and Scandinavia, signing our first own-brand hotel in China and lining up a pipeline of 10 new Cook's Clubs in some of our key destinations for Summer 2019."

Thomas Cook reported that the warm temperatures had also had an impact on winter bookings at this stage.

Egypt is among the destinations it has invested in though the country's efforts to boost tourism suffered a setback last month when a British couple died in mysterious circumstances while on a Thomas Cook break.

The company has been supporting efforts to get to the bottom of how John and Susan Cooper, from Lancashire, died.

A UK inquest was told last week about a "musty smell" in their room at the Steigenberger Aqua Magic Hotel in the Red Sea resort of Hurghada.

Thomas Cook said a greater focus on Turkey, Greece, Tunisia and Egypt had proved a strong point.

It said overall group tour operator bookings were up 1%, while pricing was 3% higher than last year.

Its statement continued: "The slowdown in (UK) customer bookings during June and July extended into August, leading to higher than normal levels of promotional activity.

"This has exacerbated pressure on margins, on top of an already competitive market for Spanish holidays, as previously highlighted."

Thomas Cook is due to report its full-year results on 29 November.