Broker snap: Thomas Cook still a buy despite booking disappointment, says Charles Stanley

24th Jan 2012 10:42

Charles Stanley has maintained its buy recommendation on Thomas Cook despite reports of poor bookings at the travel group over the first two weeks of the year.Thomas Cook's summer bookings by British customers fell 33% in the first two weeks of January according to an industry leisure monitor reviewed by Financial Times. The start of January is a key period for tour operators with around 15% of summer bookings usually made in the first half of the month. The decline in bookings is twice the sector average (-15%) and three times the decline at TUI Travel (-11%), seen as another benchmark for the sector.Nevertheless, Charles Stanley analyst Douglas McNeill says "it would be unwise to read much into a snapshot of trading over a period as short as a fortnight."However, McNeill notes that Thomas Cook's performance may have fared considerably worse than TUI's due to the adverse publicity surrounding its finances as of late. "That's worrying, on the face of it. But it probably stems from the group's changing sales strategy, rather than a lack of consumer confidence in its solvency."He says that Thomas Cook's new management at the UK division believe that the firm's sales agents have been too keen to shift inventory early in the year and to offer discounts."They want to see prices held for longer, in the belief that the product will eventually sell anyway - thus leading to a better overall margin. And that approach would, of course, mean fewer bookings in the early part of the year," McNeill explained.The broker maintains a 25p target.BC