Thomas Cook says holidaymakers defy downturn

By Matthew Scuffham

LONDON (Reuters) - Thomas Cook, Europe's No.2 travel company, reported strong trading as consumers continued to book holidays despite an economic slowdown stretching household budgets.

However, shares in the group, which had risen by 40 percent over the past month boosted by the weakening oil price, fell 3.5 percent to 236.5 pence by 11:52 a.m. on Wednesday as some investors took profits.

Investec, which kept its 'buy' recommendation on the stock, cut its earnings forecasts.

"We recognise that uncertainty will remain on bookings for summer 2009 until the end of 2008/early 2009 and, after a 40 percent bounce over the last month, think that some profit taking is possible," said Investec analyst Joe Thomas.

Thomas Cook Chief Executive Manny Fontenla-Novoa told reporters the group, a unit of German retailer Arcandor (AROG.DE), has so far seen no evidence of consumers cutting back on holidays or trading down.

"The main holiday is a 'must have' item for consumers. In our experience, people will cut back on all sorts of other things before they cut back on their holiday," he said.

The group, created last year from the tie-up of Arcandor's travel unit and Britain's MyTravel, said trading in the 2008 summer season is strong in all markets and early indications show bookings to be ahead of last year for winter 2008/9 and summer 2009.

Thomas Cook said it is on track to meet its expectations for the current financial year. The average forecast for pretax profit is 426 million euros (338 million pounds), according to Reuters Estimates.