There has been a lot of rubbish written about Thomas Cook – not, I should add, by Cook itself.
Yesterday, for example, we were told about “Thomas Cook’s retreat from the high street”.
In fact, Cook will have pretty much as many UK shops after the current spate of closures as three years ago. That might be sensible: it is hardly a retreat.
Some commentators have been entranced by the sudden rise in the group’s share price – as though share prices can tell us anything about the prospects for the economy let alone a single company at the moment.
Indeed, in the case of Cook’s share price there is an element of what comes down, must go up.
Others have been entranced by Cook’s strategy document, released yesterday, which offered a master class in “high-touch” as far as City analysts are concerned.
The document is strong on aspiration, with a forecast of £350-million improvement in savings and revenue and a meticulous breakdown of where this will come from.
However, the test will come in marrying outcomes to targets when real life intervenes – in the form of a triple-dip recession, perhaps, or ‘stagflation’ or a sterling crisis or a break-up of the eurozone.
Chief executive Harriet Green was right to open her remarks yesterday by pointing out: “Thomas Cook is fundamentally a sound business.”
Commentators in the UK, in particular, consistently miss the fact that Britain is just one of three core markets for Cook and in two – Germany and Scandinavia – the group has operated successfully throughout the recent period.
There was little mention yesterday of the 2,500 UK job losses announced a week ago. The statement to the City was all about the next three years for the group, not three months for the UK.
It attempted to distil Cook’s strategy into four key terms: ‘trusted’, ‘personalised’, high-tech’ and ‘high-touch’ – which may be pleasing PR but does not tell us very much.
Beneath the jargon lies a plan with several components: the first, “addressing costs and cash”, is underway – but there is more to come.
Since its meltdown of late 2011, Cook has identified £350 million in cost savings and “benefits” to be realised by the end of financial year 2015.
Of this, £140 million is from the UK – with £60 million apparently delivered last year and another £60 million to come this, leaving £20 million to deliver in 2014.
Assuming things go to plan, the hard yards should be completed in the UK by this time next year.
However, next year will be crucial to squeezing group costs, with £130 million earmarked for 2014 compared with £25 million this year.
The cash improvements will come from four areas: UK restructuring, improvements to hotel purchasing, and restructuring the group’s web and airline businesses.
Growth is projected to come also from four areas, and it is here the document is most interesting.
A major piece of consumer research has led Cook to conclude that the sun and beach market is not saturated, that the package holiday market is growing, that the group is lightweight in areas such as city breaks “and this must change”.
So Cook will expand its exclusive “hotel concepts”, Sunwing, Sentido and Smartline which are already a success in Germany and Scandinavia.
It will offer more “winter sun”, dynamically packaged city breaks, quality budget hotels and accommodation and room-only. And it will drive business online, aiming for 55% of bookings in the UK by 2015.
Cook will pursue this while balancing “the desire for rapid improvements against the necessary lead times for major infrastructure projects”.
What has happened thus far has been the easy bit – for all that the cuts in the UK are deeply unpleasant. The real challenge is to come.
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