Thomas Cook has become the latest UK retailer to announce plans for shop closures as it looks to reengineer its business to reflect the trend for customers to buy online.
The travel company, which today reported a £398m loss for the year to September 30, said it would close around 200 shops whose leases were due to expire in the next two years, and review the performance of others “as leases come up for expiry and more customers move online.” The closures are expected to mean hundreds of job losses.
Some 25% of Thomas Cook bookings are currently made online, and the company predicts that will increase to between 40% and 50% over time. It is to improve its UK websites in order to encourage this to happen.
The company said its move to increase online distribution as part of a multichannel approach to selling holidays came in the face both of falling demand for traditional package holidays and competition from internet distributors and low-cost airlines.
At the same time, Thomas Cook reported turnover of £9.8bn in the year to September 30, up from £8.9bn at the same time last year. But pre-tax losses, following a series of writedowns in the value of assets, came in at £398m, down from profits of £42m last time. The Arab Spring had hit bookings to the Middle East and North Africa hard, it said, while the UK market turned in a "poor performance".
Thomas Cook recently saw the value of its shares fall by a dramatic 75% in one day when it delayed its results in order to renegotiate its lending. Today they lost 6% of their value in morning trading, falling to 13.87p at the time of writing.
Interim chief executive Sam Weihagen said customers had been "very supportive" and were continuing to book with Thomas Cook.
"Bookings outside the UK were broadly unaffected by news of our refinancing," he said, "and in the UK bookings have recovered well. For over 170 years Thomas Cook has provided customers with fantastic holiday experiences and we will continue to do so."
Our view: Closing shops in the light of growing online sales has become a common theme in recent days. Yesterday Carpetright said it would close 93 shops in the next five years, while last month Arcadia Group said as many as 275 of its shops could go in the next three years.
It's also worth remembering that TUI Travel last week said online was now its biggest sales channel. That's not yet the case for Thomas Cook, but it certainly expects that it will be soon, as it looks to take as many as 50% of its bookings via the website.
This recognises a real sea change in the way that people are shopping today. But while a reduced high street presence seems inevitable for many retailers, it's also important that a strong presence does remain since what most consumers tell researchers again and again is that they want multichannel shopping, with the ability to talk to someone face to face, or to pick up an item in person through click and collect, important for many. That's why the multichannel leaders, such as John Lewis which this week turned in record sales, most frequently announce store openings, rather than closures, together with new format shops as they look to get ahead of consumer trends.