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Mass closures unnecessary: Flight Centre


FLT plans to use new physical stores to diversify services

Flight Centre has been told that it could increase profit by several millions of dollars over two years, if it were to reduce the size of its bricks and mortar network. 

 

Image ABC News / Jeremy Story Carter

 

Bryan Raymond, an analyst at Citi, said around 10% of the travel agency group’s physical stores could be culled, largely due to an over-saturation of Flight Centre outlets. 

 

“Following Flight Centre’s brand consolidation, 83 per cent of the 950 store bricks-and-mortar network is now branded as Flight Centre. This has resulted in a high store density for a single brand, particularly as online penetration is rising,” Mr Raymond said.

 

“Our geospatial analysis of Flight Centre’s network has identified 259 Flight Centre branded stores that are located within 1km of another Flight Centre. 

 

“In our view, this creates an opportunity for store network consolidation to drive higher levels of profitability through lower rent and labour costs, and the expense of [total transaction value],” added Raymond, who put the potential gain at $8 million over 24 months. 

 

But Flight Centre said it would utilise its growing network to diversify its product, through ventures like its new Universal Traveller brand and more specialised business travel units, especially in CBD locations. 

 

“We close some shops every year, relocate some others and, when good opportunities arise, we work closely with landlords to secure new sites and open new shops,” a Flight Centre spokesperson told Inside Retail

 

“Within Flight Centre brand in Australia, most of these openings in recent years have tended to be specialist shops and teams, rather than traditional Flight Centre shops.” 

 

Flight Centre recently downgraded its guidance for the 2019 financial year by around 10% to between $335 million and $360 million. 

 

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Written by: Mark Harada

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