Falling sales of more than 55% in the first part of the year for two of the world’s largest duty-free retailers and players have caused transient effects on percentage costs as the fight to stop losses intensifies.
This morning, Dufry, whose best-known retail fascias come with Hudson and World Duty Free, announced a drop in sales of more than 60% to 1.59 billion Swiss francs ($1.73 billion) due to a shortage of roaming buyers, basically at airports, but also at exercise stations and other environments such as cruise lines.
This led the Swiss store to an operational loss of 933 million Swiss francs in the first part of 2020, with a profit of 123 million Swiss francs in the same year. The dollar replaced is $1.15 billion. Dufry’s inventory fell 7.6% on this morning’s news before he fully recovered.
The drop in sales is closer to making plans Dufry’s worst situation of a 70% drop by 2020 complete than the most productive case of a 40% drop. While passenger flows have returned since mid-June, July sales remained weak, 82% (compared to July 2019), despite an improvement from the 94% drop in April.
Dufry Group CEO Julion Daaz noted that while situations are difficult for the industry, more than 1,000 of its outlets were up and running again in July. By the end of August, the company plans to open about 1,200 outlets, or a portion of its home inventory, which still account for 70% of its sales capacity.
Dufry has also introduced load reduction measures with the goal of generating constant load savings of around one billion Swiss francs this year. Of this amount, nearly one-third will be for minimum annual warranty exemptions for airport owners. One of Dufry’s biggest negotiations on this issue is expected to take a position with airport operator Aena in Spain.
A simplified organizational design will be in position from September. “At the organizational level, the groups that cover our global purposes and our countries will increase their potency and approach the market position and our customers.”
The new organization replaces a well-defined geographic control design with a design that might not be as transparent to some; in fact, only North America remains an intact entity at the highest point of control. It remains to be noted how this proximity to the market develops. However, from a bureaucratic perspective, adjustments deserve to at least increase Dufry’s agility and decision-making.
The duty-free market leader did not mention any express retail projects to succeed over the Covid-19 crisis, but pledged to build its small Asian footprint, which lately accounts for only 15% of its sales. Instead, the company slowed down its store renewal program to lower capital expenditures, but continued its projects that can lead to sales opportunities.
Stores in London, the UK, Athens and Thessaloniki in Greece, Macau in Greater China, Guayaquil in Ecuador and the US airports of Los Angeles and New York have been renovated. They cover 68,350 feet or 1.4% of the sales area operated through Dufry.
In the first two months of the year, the company also opened new outlets at airports in Helsinki, Finland; Perth, Australia; Indianapolis Calgary, Canada; and Florian-polis, Brazil. These locations cover 0.6% of Dufry’s general advertising space. The company hopes that these renovations and new openings will attract the interest of buyers and stimulate assistance.
Dufry’s French rival, Lagardére Travel Retail, performed better in the first part of the year, with sales falling 55% to 947 million euros ($1.1 billion), but his parent company, Lagardére, also saw his percentage fall before recovering.
The Travel Retail recorded an operating loss of 209 million euros after posting a profit of 46 million euros during the same was in 2019. The replacement of 255 million euros ($300 million), significant, is overshadowed by Dufry’s huge $1.15 billion (see above).
Like Dufry, Lagardére Travel Retail has restarted operations on what it calls “tailored” since April, in line with the reopening of stations and airports. A minimum in April sales of minus 91% is expected to be reduced to about minus 65% once the July figures are known.
This strong uptick was aided by the exposure of Lagardére Travel Retail to China, the epicentre of the coronavirus and Asia-Pacific pandemic in general. Resilience in mainland China led to annual revenue declines of only 0.7% in the quarter, thanks to openings in 2019, strong online and social media sales, and the resumption of domestic travel. Total sales in the Asia-Pacific region fell by 52% in the first part of the year.
This compares well with other regions. The activity of the first semester in France was reduced by almost 60%, did not help through movements in early 2020; EMEA (excluding France) fell 53%; and North America contracted through 53.2%. In a statement, the company said, “Short-term uncertainties related to air resumption do not call into question (our) strong business style or leadership.”
The regional effects compare well with those of their rival Dufry, the way the two corporations divide their regions is not exactly the same. Dufry’s largest department in Europe and Africa lost 66% in the first half, while North America’s largest region fell 58%. Central and South America was the least affected, with a contraction of 56%.
Last week, Lagardére Travel Retail also introduced a new eating place concept called Pick and Go in its tax-adding store formats. In the days of Covid-19, the goal was to provide travelers with safe and simple access to a variety of prepackaged food products, adding a children’s menu and generating the additional source of income they desperately need.
It is an option for air restoration that maximum carriers and rail operators have stopped due to the pandemic.
Mélanie Guilldou, executive vice president of Lagardére Travel Retail Foodservice, commented: “Pick-Go fulfills the wishes of consumers who need an affordable option for onboard catering, and owners who need to maximize the time passengers spend in airports and resorts.” “
The deployment began in France on 28 July, with “at least” 15 countries designated for the concept until October.
For both Dufry and Lagardére Travel Retail, the quarter of the moment will have noticed the worst drops in now-extended sales. Although momentary Spikes of Covid-19 are observed in the United States and new locks are emerging around the world, travel has been modestly restarted.
While this is not impossible, the lockouts of entire countries, observed from March to May, seem unlikely, as governments instead opt for localized movements to verify and revitalize their fragile economies. Instead, travel quarantine will be a key determinant of holiday plans this summer, and tax-free spending in turn.
I have been writing on the global retail channel for more than 20 years, specializing in the categories of good looks and luxury. I’m interested
I have been writing on the global retail channel for more than 20 years, specializing in the categories of good looks and luxury. I am especially interested in knowledge and trends, as well as in the sectors such as aviation and tourism that underpin sales. I have self-employed at The Mirror, The Times (London), Elle (Hong Kong), The South China Morning Post, The Moodie Davitt Report and Jane’s. If you have a story to tell or applicable studies to share, please contact us at [email protected]. I’m founded in London, United Kingdom.