Thomas Cook in cost saving measures

All,

Thomas Cook: Below Is an announcement from Thomas Cook about further restructuring of their UK stores. This isn’t a surprise - as more and more customers move to book online.  (Nearly 2/3rd of Thomas Cooks UK customers book online). But this points to further cost pressure for Thomas Cook as they compete with competitors that are fully online. Pricing going only one way.

At first glance the announcements seem to amount to savings of approx. £15m: 

1) 320 employees x £30k = ~£10m

2) 21 stores x £250k = £5m

But ultimately Thomas Cook’s remaining estate of 545 stores may be in for a CVA like so many other retailers who have lost revenues to the online market. TCG now sell 65% online. Moreover, if the company sells its airline business, it’s CF profile will be even more extremely skewed around the summer months, thus making it risky to support a brick&mortar cost structure in the other 10 months if all that remains is a brokerage business that will struggle to differentiate itself from its run-of-the-mill online rivals - unless of course they keep the cash from the sale and invest in hotels at the destination - like Tui. But that would have big implications for bondholder expectations at current values.

Wolfgang

Thomas Cook accelerates UK efficiency programme

22 March 2019 - Thomas Cook today announces new measures to streamline its UK retail network as part of an ongoing programme to drive greater efficiencies across the business and address changing customer behaviour. More and more holidaymakers are switching online, accounting for 64% of all Thomas Cook bookings in the UK last year.  Growth in online has been the fastest in all sales channels, rising by 30% in 2018 with continued strong momentum.

Today's announcement would see the closure of 21 stores across the country, reducing the UK retail estate to 566 shops, which would result in an expected 102 customer-facing roles being made redundant. A further 218 store-based roles are proposed to be removed across the network following a review of the retail workforce. A consultation process with the affected staff and their union representatives has begun.

Thomas Cook has developed its digital travel applications into some of the most trusted in the market. Customer satisfaction with the UK website, measured by net promoter score, rose 5 points in 2018. In addition, two in five Thomas Cook holidaymakers departing from the UK now use the company's app to help manage their holiday.

Chief of Tour Operating, Will Waggott, said: "Today's announcement reflects the wider challenges seen on the high street, with more and more customers choosing to book online. These measures will help us to drive greater efficiencies across Thomas Cook so that we relentlessly focus our resources in those areas that give us the greatest opportunity to make a difference to customers in our core holiday offering.

"Looking ahead, we will be working to ensure that Thomas Cook is fit for the future, putting a rigorous focus on costs in a competitive environment while giving customers more reasons to holiday with the strongest brand in travel."

The 21 stores listed for closure are included in the notes to editors.