On The Beach Shares Plunge Following Profit Warning and Restructuring

On The Beach has issued a warning regarding its full-year profits, leading to a significant drop in its share price. The holiday package company announced plans to close its Classic Collection division, which has incurred losses. This restructuring comes as consumer behavior shifts, with more holidaymakers opting for last-minute bookings rather than planning trips well in advance.

The company revealed it will wind down its Classic Collection business-to-business division, which recorded a small loss for the year ending September 30. While On The Beach’s consumer segment is thriving, boasting record sales and a surge in summer bookings, the trend towards last-minute travel has affected its projections for summer 2026.

In an indication of the broader market trend, holiday giant Tui also highlighted an increasing preference for last-minute bookings in its recent communications. As a result, On The Beach’s shares plummeted by as much as 20% at one point during trading, reflecting investor concerns following the profit warning. The company now anticipates underlying pre-tax profits between £34.5 million and £35.5 million, significantly below the £38.4 million expected by analysts, who had factored in a profit of £2 million for the Classic Collection division.

By Thursday morning, shares had stabilized but remained down approximately 14%. Despite this setback, Chief Executive Shaun Morton remains optimistic about the company’s future. He emphasized the commitment to achieving an annual target of underlying pre-tax profits of £85 million.

Strong Demand Amid Changing Booking Patterns

The latest update from On The Beach indicates a 12% increase in bookings for the upcoming summer season, with total transaction value sales climbing 11% to a record £1.23 billion. Additionally, winter bookings have shown robust growth, rising 12% year-on-year.

Morton highlighted that customers are prioritizing vacations, as evidenced by the strong winter bookings. He expressed confidence that summer 2026 will continue to develop positively, despite the industry’s trend towards later bookings.

“The board and management team remain focused on delivering the group’s medium-term ambition of total transaction value of £2.5 billion, EBITDA of £100 million, and adjusted pre-tax profits of £85 million,” Morton stated.

On The Beach is set to release its full-year results on December 2, 2023, which will provide further insights into the company’s performance and future direction. The market will be watching closely to see how the firm adapts to the evolving preferences of holidaymakers and the implications for its business strategy.