What's going on?
Shares of the world’s oldest travel company, Britain’s Thomas Cook, nosedived 23% on Tuesday after it drifted below investors’ profit expectations yet again – and canceled its dividend.
What does this mean?
Back in September, Thomas Cook’s stock hit turbulence when it warned investors that its annual profit would be lower than expected, thanks to a record-hot summer in Europe putting off would-be holidaymakers from going abroad.
But the company had bulked up its jet fleet and pre-booked hotel rooms ahead of time, forcing it (and rivals like TUI) to slash prices in order to tempt customers to book trips. As a result, profit for the year was around 20% lower than the last – and the company had told investors to expect only a 15% fall. Now, analysts are taking the company’s stated aim to “deliver progress” to mean that profit for the year to come will also be lower than predicted.
Why should I care?
For markets: Mayday at Thomas Cook.
Thomas Cook’s selloff’s likely due in part to the company announcing it’ll cancel its dividend – a regular share of profit paid to shareholders – this year. With the company’s debt rising to almost $500 million, it probably needs that cash to help steer the company back to sunnier climes. “Income investors” who rather like these payouts (including, perhaps, those looking after your pension) might have sold their stakes, seeing as there’s no cash light at the end of the annual tunnel.
The bigger picture: Greggs is feeling hot hot hot.
Shares of British baking chain Greggs (which has more branches in the UK than McDonald’s!) rose 12% on Tuesday as it told investors it’s expecting the golden donut of higher sales and profit for the year. A warm summer and mild fall may have benefited the company: since more Brits were home enjoying the weather, they may have used some of the vacation money they saved on Greggs’ occasionally controversial snacks, giving the company a boost.