Thomas Cook had previously announced earlier this year, its plans to close 75 UK commercial properties after slow sales, which caused shares to plummet. The firm, however, has since revised this figure to 200 stores, and plans to close them over a two year period.
Out of the 200 commercial properties that are due to be closed, approximately 115 will be informed about the effect by the end of next week. This will result in 661 redundancies, which will not help the ever growing unemployment figure in the UK.
Speaking of the difficult times for the Thomas Cook Group, Sam Weihagen, Chief Executive, expressed: “This has been a very challenging year for the Group, despite which we still delivered an underlying operating profit of over £300m. We have instigated significant management changes and implemented a turnaround plan in the UK to address our areas of underperformance. We continue to take action to substantially strengthen the balance sheet and the Board is undertaking a full strategic review. I am confident that these changes will improve profitability and build a stable foundation from which to rebuild shareholder value.”
“Customers have been very supportive in recent weeks and are continuing to book with Thomas Cook. Bookings outside the UK were broadly unaffected by news of our refinancing and in the UK bookings have recovered well. For over 170 years Thomas Cook has provided customers with fantastic holiday experiences and we will continue to do so,” Mr Weihagen added.
The firm recently secured a loan of £200 million from major high street banks to help it out of its sticky situation. The banks, which funded the loan, include: HSBC, The Royal Bank of Scotland (RBS), Barclays and UniCredit. The loan will be provided on terms up until the 30 April 2013.
So what are the factors that have contributed to Thomas Cook’s fall?
The company is blaming the trouble in both Egypt and Tunisia along with the floods in Thailand, for poor sales, as they are all popular holiday destinations. However, many people believe that the fact that Thomas Cook spent large amounts of money on buying companies to add to its portfolio, could have something to do with the predicament that the company is in today. Thomas Cook recently added 460 commercial properties from The Co-operative Group, which was only completed in August of this year. Speaking of the merges, Wyn Ellis from Numis Securities, stated: “The group focused too much on the commodity end of the business and didn’t develop its internet business sufficiently.”
However, it seems that Thomas Cook has seen the light and decided to start selling off some of their assets. Last Thursday they sold ‘Hotels Y Clubs De Vacaciones’, which is the company’s Spanish hotel chain to ‘Grupo Iberostar’ for £61 million (€ 72.2 million).
But do you think this could be a little too late for Thomas Cook, especially with the likes of Tui announcing significant profits this year? Will customers lose trust with Thomas Cook and go elsewhere? Like us, you will have to watch this space.
