The Flight Centre Travel Group Ltd (ASX: FLT) share price has continued its poor run on Friday and dropped to another 52-week low.
At the time of writing the travel agent’s shares are down 1.5% to a lowly $41.33.
Why is the Flight Centre share price at a 52-week low?
The Flight Centre share price has come under pressure over the last 12 months due to allegations that it was ripping off customers and underpaying its staff.
An ABC investigation spoke to staff who said the company “encourages its travel consultants to gouge customers by adding hundreds, sometimes thousands, of dollars to bookings.”
One company that was reportedly overcharged was banking giant National Australia Bank Ltd (ASX: NAB).
According to the SMH, the bank dumped Flight Centre’s corporate bookings division as its travel provider after it discovered that it had been overcharging during the booking process.
I suspect that many in the market are concerned that this may have damaged the company’s reputation and could impact its future financial performance.
Speaking of which, at its annual general meeting late last year the company advised that first-half profit before tax would range between $140 million and $150 million, which represents an increase of just 0.4% to 7.6% over the same period last year.
The full year outlook was similarly weak, with management expecting profit before tax to come in at $390 million to $420 million. This will be 1.4% to 9.2% ahead of FY 2018’s result.
The underperformance of its Australian business has been blamed for the weak outlook.
Should you buy the dip?
Although Flight Centre’s shares have fallen meaningfully in recent months, I would suggest investors hold out for the release of its half year results in February to see whether the company is tracking to the low or high end of its guidance range.
Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Flight Centre Travel Group Limited. The Motley Fool Australia owns shares of Helloworld Limited and National Australia Bank Limited. The Motley Fool Australia has recommended Webjet Ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.