Australians appear to be reining in their holiday plans as they fret about how the government’s budget spending cuts will hurt their family finances.
Travel retailer Flight Centre says holiday bookings have come off the boil since mid April and fears its profits will suffer.
Consumer confidence has plunged since the government handed down its budget last month, with families worried about the impact the cuts will have on their budgets.
Flight Centre said trading conditions had been tough for its Australian leisure business for eight weeks.
While the business was continuing to grow and increase market share, there had been a slowdown.
“While demand often rebounds quickly after a short-term downturn in the leisure market, conditions are uncertain and it is obviously impossible to predict the timeframe for recovery,” managing director Graham Turner said in a statement on Wednesday.
Flight Centre no longer expects to reach the top range of its underlying profit targets for this financial year.
It now expects its underlying profit before tax to be between $370 million and $385 million in the year to June 30, at the lower end of its previous guidance range.
Its shares dropped by one per cent in early trade, but it managed to finish the day 53 cents higher at $46.43.
Flight Centre’s news coincided with two key consumer sentiment surveys showing confidence levels had failed to pick up since their dramatic post-budget falls.
Other companies exposed to consumer spending are feeling similar pain to that of Flight Centre since the Abbott government’s May 13 budget.
Discount retailers The Reject Shop and Pacific Brands, which makes Bonds clothes and Sheridan sheets, also issued profit warnings this week related to the drop in consumer confidence.
Flight Centre’s profit warning shows no one in the discretionary retail space is safe, OptionsXpress market analyst Ben Le Brun says.
“A potential downgrade-a-thon may be in the offing over the next few months,” he said.
“On the evidence, May seems to be where the pain has stepped up a notch and a lot of that would have to do with the handing down of the federal budget.”
Retailers including Myer, Super Retail, Kathmandu and Premier Investments are likely to experience continued pressure in their share price in the short term, or until they delivered profit warnings of their own, he said.
IBISWorld senior industry analyst Ryan Lin said the tourism industry would most likely ride out “short term negatives,” especially domestic tourism.
“In the next five years, the falling dollar is expected to make Australia a more attractive destination for foreign and domestic tourists,” he said.