Airport Retailer Dufry’s Sales Rise By Over 50% In 2021, But Asia Contracts Sharply

Hemispheres clashed last year for the world’s biggest airport retailer, Dufry. Strong rebounds in the Americas, up 53%, and EMEA (Europe, Middle East and Africa), up 49%, squeezed out Asia Pacific, which saw a sharp contraction of 39%.

The Americas, led by North America and the U.S. in particular, now contribute 45% of Dufry’s revenue which hit $4.2 billion (Swiss francs 3.92 billion) in 2021, up by 53% year-over-year. EMEA has the same share while Asia Pacific, where Dufry has tried to make headway in the downtown duty-free market of China’s Hainan province, now contributes just 2.5% of sales.

Widely adopted zero-Covid policies across Asia Pacific—which failed to stop a big and continuing outbreak in Hong Kong—have stifled international travel in the region and, in turn, damaged duty-free sales.

In an investor call on Tuesday, CEO Julián Díaz—who will step down at the end of May—commented on this, saying: “What happened in 2021 is very important for the future. Every time that restrictions or limitations to traveling—especially quarantines—are released, the situation improves very quickly.”

Where those restrictions have eased, for example the Americas and Europe, Dufry saw a sales bounce-back. Not so in Asia. Díaz said: “An ongoing problem is Asia Pacific (where) most countries are subject to restrictions and limitations, especially quarantines.” It has meant that at Hong Kong International Airport, for example, Dufry’s shops are closed or operating at very low levels in line with flight and passenger movements.

Dufry’s duty-paid sales now bigger than duty-free

What the geographical re-balancing has also meant is that, for the first time, Dufry’s duty-paid sales are now bigger than duty-free (52% versus 48%), driven in part by the much greater influence being exerted by Hudson’s expanding domestic retail stores in U.S. airports.

Aside of the Asia Pacific collapse, Dufry has navigated the second year of the pandemic pretty well to come out with over 50% growth versus 2020. French rival Lagardère Travel Retail rebounded by 33% to $2.6 billion last year.

Key strategic element that have allowed Dufry to bounce back include:

• Driving re-openings in line with business recovery: By the end of December 2021, around 1,900 shops globally were open again, representing around 88% of 2019’s sales capacity.
• Shoring up the company’s financial position: Roughly $3.2 billion was raised through equity and debt, plus additional bank liquidity and covenant waivers. Meanwhile the company maintained a resilient retail margin of above 60%, helped by minimum annual guarantee waivers to airport landlords of $1.2 billion.
• Renewing and diversifying the portfolio: This included travel retail and F&B in the United States, in fast-recovering Central America, and also in Asia Pacific. In total there were over 105,000 square feet of new openings in 2021, equivalent to 2% of the company’s total retail footprint. Over 207,000 square feet of space was also refurbished last year.

Nevertheless Dufry is still down by about 56% on 2019 sales, and its share price has fallen by 42% over the past year. So 2022 will be a pivotal year for speeding up its recovery, especially with a new CEO taking the helm.

While the company sees strong demand for the resumption of travel “with shopping as an integral part of the overall experience” the company admits there is limited visibility on the current geopolitical environment, for example how the Ukraine war could impact travel recovery. As such Dufry did not provide guidance for 2022.