Thomas Cook Group’s decision to cut 2,500 jobs and close 195 stores has gone down well in the City as a much-needed restructuring following its “dismal” financial performance, said a leading analyst.
Douglas McNeill, investment director at stockbrokers Charles Stanley, told Travel Weekly that the move, although sad for those at risk of losing their jobs, was necessary.
“The City is pleased to see restructuring taking place,” said McNeill. “No-one is ever keen to see other people losing jobs so the restructuring that is underway is tempered by thoughts about those losing jobs, but it’s beyond question that things needed to change at Thomas Cook.
“I would say that the City has thought something like this was on the cards for quite some time. The management has led the City to expect cost savings without being particularly specific.”
“lt hasn’t required much imagination to realise that a lot of reductions was on the way,” said McNeill, as it is doing less business than it used to.
“Capacity is down this summer season, 4% down at the last count,” he said. “That’s not the first such reduction. Reduction in the winter season was greater than that. Sooner or later, you are going to conclude that you are going to need fewer staff.”
McNeill said that Thomas Cook’s chief executive Harriet Green was instilling confidence because of her plans to cut costs.
“Financial performance has been dismal for quite some time and the share price tells you that the City is confident in Harriet Green’s ability to restructure," he said.
Thomas Cook saw its share price drop by more than 4% yesterday in the wake of the travel group’s mass jobs cut announcement a day earlier.
Shares in the company were down 3.5p to 82.5p but this was more than 15% below its 52-week high of 97.38. At yesterday’s rate, the group’s market capitalisation was £787.92 million.
Cook is to cut 2,500 jobs and close almost 200 agency branches as part of a financial turn around plan. An update on the business transformation plan and new strategy for the group is due to be given by chief executive Harriet Green on Wednesday.
A brief trading update will be given ahead of first half results to be announced in May.
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