Duty-free retailers are regaining momentum.
This year’s travel recovery, which has wreaked havoc on many airport passengers due to staff shortages and canceled flights, has proved a shot in the arm for duty-free retailers Dufry and Lagardère Travel Retail.
Global duty free is now on the road to recovery after the ravages of the pandemic, but numbers from these two leaders in travel retail suggest some regions are faring much better than others.
As travel gradually picked up in the first quarter and then accelerated thereafter, France’s Lagardère Travel Retail’s half-year sales doubled to 1.69 billion% through June, respectively. The increase was due to a strong recovery in intra-European and transatlantic travel.
Growth was slower in the Americas, where Lagardère Travel Retail reported a 79% increase in sales, while in the US it was up just 64%. But that has to be seen in the context of the company’s US business, Paradies Lagardère, which has performed well over the past year given the rise in American domestic travel that was already beginning then, making comparison difficult.
In a social media post, CEO Dag Rasmussen called the first-half performance “extraordinary,” saying, “This is largely due to the dynamic recovery in air travel and outstanding efforts to optimize revenue potential and deliver efficiency gains.”
Dufry hits $3 billion
Switzerland-based Dufry upped the ante with sales up 147% to hit 2. To see also : How to save money when you buy video games and consoles.92 billion Swiss francs (just over $3 billion) in the first half, boosting its share price by 4% on Tuesday .
Dufry has seen a strong recovery at European airports including London, Heathrow Airport. (Photo by: … [+] Prisma by Dukas/Universal Images Group via Getty Images)
EMEA — the retailer’s largest region, which accounted for about half of global sales in the first half — led the way with sales tripling to $1.53 billion. Mediterranean countries like Turkey, Greece and the Middle East were the best performers as leisure demand picked up. In addition, Great Britain, France, Spain, Eastern Europe and Africa made progress.
The new CEO of the Dufry Group, Xavier Rossinyol, commented: “Regions such as North America, Central America and the Caribbean, as well as some southern European and Mediterranean countries are performing similar or better than 2019. We are monitoring consumer sentiment and the propensity to travel-related spending over the coming months.”
Dufry continues its positive momentum in the third quarter, with July sales estimated at 90% of 2019 (at constant exchange rates). This is up from 85.5% in June. At the end of July, 2,091 stores were open again worldwide, representing more than 90% of sales capacity.
However, for the half-year to June, Dufry’s sales still lagged about 25% behind the first half of 2019, while Lagardère was down just 15% and could reach pre-pandemic revenue by year-end. Another indicator of normalization is that the ratio of duty-free to duty-paid at Dufry has shifted. Duty-free sales again make up 58% of sales, while duty-paid sales account for 42%.
Around this time last year, the strong revival of the US domestic travel market, led by Dufry’s Hudson business, saw duty paid sales become the primary sales segment for a while, accounting for a 54% share.
Awaiting a revival in Asia
Where both companies continue to suffer is in the Asia-Pacific region, although revenue there isn’t particularly significant. For Dufry, growth reached an anemic 5% with sales reaching just 16% of 2019, largely thanks to restrictive Covid approaches affecting many markets. For Lagardère, Asia-Pacific revenue grew even less at 1.6%, thanks largely to the opening up of the Pacific zone, while China’s zero-Covid policy and recent lockdowns severely hampered a recovery in Chinese domestic and international air passenger travel.
Lagardère Travel Retail’s Aelia branding at Rome’s Fiumicino Leonardo Da Vinci Airport, Italy. On the same subject : Denver’s real estate market is changing, quite a bit. … [+] (Getty)
Dufry now exudes more confidence as it is set to join forces with Autogrill, a deal that gives the Swiss company something it has never had before on any scale; a Food and Beverage (F&B) area. The move also detracts somewhat from the spotlight of Lagardère Travel Retail, whose unique selling proposition was its integrative approach to the travel retail channel, encompassing plenty of F&B know-how.
But Rasmussen remained optimistic that the model his company pioneered will continue to thrive. “Interesting times lie ahead for our industry. Our long-standing expertise in developing holistic customer journeys across three business units (duty-free retail, convenience and F&B) is a great strategy,” he said. “We’ve been pushing it for the past 10 years, and I believe changing market dynamics will give us more opportunities to capitalize on, not fewer.”
Dufry expects to complete the first phase of the Autogrill deal – the transfer of Edizione’s 50.3% stake in Autogrill – by March next year, “subject to approval by our shareholders at the upcoming (31 August) AGM,” noted Rossinyol.
