The CEO of the world’s biggest airport retailer says that high travel costs are not discouraging spending in its shops. He also shrugged off the macroeconomic woes of high inflationary pressures and interest rates, noting that “we are not seeing a slowdown (and) the summer will be strong.”
The comments came from Dufry’s Xavier Rossinyol during a conference call with analysts on Friday when he revealed some resilient first-half results for the company and travel food business Autogrill, which is now fully combined after a merger and delisted from the Italian Stock Exchange.
Core turnover at Dufry (excluding net sales from its motorway fuel business) grew by 31.5% (using a proforma comparison) to 5.72 billion Swiss francs ($6.56 billion) based on organic growth. This was driven mainly by strong travel demand in the second quarter, particularly in the Europe, Middle East, and Africa (EMEA) region where leisure traffic held up well.
The growth is on a par with rival French global duty-free player Lagardère Travel Retail whose first-half sales were up 32.4%, reaching €2.33 billion ($2.6 billion).
Dufry’s July revenue is estimated to be up by 17% versus July 2022 and almost 5% ahead of July 2019 for the combined group. However, net profit more than halved from 93.2 Swiss francs in H1 2022 to 39 Swiss francs this year though, at the operating level profitability was stable with an increased margin of 8.6%, ahead of expectations.
Spain – a strategic location for Dufry “but only because it’s a good business” said Rossinyol – is a market that Dufry is banking on this summer. The company recently retained concessions for 95% of the locations it currently holds in Spain where, according to airport association ACI figures, Madrid’s Adolfo Suárez Airport was only 2.7% below 2019 levels and Palma de Mallorca 3.8% ahead in the first half of the year.
Europe consolidates its position
All global regions have performed pretty well for Dufry and are now ahead of 2019 revenues except Asia-Pacific. EMEA, the biggest, delivered 34% growth to reach $4.14 billion while North America, the next biggest, had the slowest uplift at 22% to $2.15 billion as Canada continued to suffer from a low level of Chinese travelers. The smallest regions had the best growth: Latin America at almost 40% to $890 million, and Asia-Pacific surging by 168% to $327 million.
Commenting on the growth, Rossinyol said: “Despite high inflation and record high travel costs people are not only traveling but consuming in a very healthy way.” But he added: “We cannot claim to be fully hedged on economic cycles; if the general economy worsens, of course, it might have an impact.”
Mitigating that is Dufry’s presence in 70 countries and more than 5,500 points of sales which means the company is reasonably well placed to cope with regional shocks. It is, however, weak in Asia Pacific (5% of total sales in H1 2023), and will not be able to take full advantage of the region’s current travel rebound which is mainly intra-regional for now.
Nonetheless, Dufry is ready to exploit its retail and food and beverage (F&B) combination, especially as F&B has been a more resilient sector in airports during the pandemic. The company has developed hybrid concepts such as Hudson Café combining both sides of its business, with more projects pipelined this year. The U.S. market is likely to be a focus because, here, customers are much more attuned to buying F&B than duty-free products.
“We are seeing more and more interest from airports in developing combined concepts, and Spain is one case,” said Rossinyol. “Spain allows F&B outlets inside the duty-free stores and that’s going to happen in Barcelona, Madrid, and Palma de Mallorca.” Lagardère Travel Retail has just opened ‘The Gallery In Barcelona’ blended food and fashion concept while Germany’s Gebr. Heinemann tested a hybrid offer in Europe in mid-2021.
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