Dufry’s Stock Slides On Q1 Results, But Is The Gloom Lifting?

Dufry’s sales in the three months to March soared by 145%* with all regions performing well with the notable exception of Asia Pacific. Yet the Swiss company’s share price fell by almost 5.8% on Thursday, and is 37% down on a year ago.

Despite the duty-free retailer’s sales bouncing back to over a billion dollars in the quarter, reaching $1.15 billion (1.12 billion Swiss francs), markets remain cautious. As the biggest player in the airport channel, Dufry is also the most exposed and the current slow recovery in Asia Pacific travel is not helping.

Earlier this week, Willie Walsh, the director general of airline association IATA, said: “Asia-Pacific is playing catch-up on restarting travel after Covid-19, but there is growing momentum with governments lifting many travel restrictions. The demand for people to travel is clear.”

Dufry has never been a big player in Asia Pacific. In pre-Covid 2019, the region (including the Middle East) contributed 15% of revenue. In Q1 2022, Asia Pacific (excluding the Middle East due to a regional restructure) accounted for just 2%.

Where Dufry has a strong presence – the Americas and Europe – sales have been very encouraging. April trading numbers put Americas sales at 83% of 2019 levels, with Central America (driven by Mexico), over-indexing at 105%.

EMEA (Europe, Middle East and Africa) has made headway too with sales at 73% of 2019, which is roughly the average for Dufry across all its geographies. However, Asia Pacific is treading water at 16% of April 2019 sales.

March data from IATA indicate that international passenger demand in Asia Pacific for March reached 17% of pre-Covid levels, after hovering at below 10% for most of the last two years. The global trend for March is about 60% so there is a long way to go.

Missing Chinese travelers

Walsh said: “The lag is because of government restrictions. The sooner they are lifted, the sooner we will see a recovery.” But he warned that much depended on China. “So long as the Chinese government continues to maintain its zero-Covid approach, it is hard to see the country’s borders reopening. This will hold back the region’s full recovery.”

That is equally true for travel retail globally where Chinese shoppers – now diverted to Hainan – were once key to global airport shopping revenues, Living with the consequences of an extended Chinese hiatus from the world’s airports has prompted Dufry to tie up with Alibaba in the hope of expansion in the Chinese market. French rival, Lagardère Travel Retail, has stolen a march on Dufry having had an early entry into China in 2007 and last year, Greater China’s share of the company’s sales rose to 11%.

In the first quarter of 2022, Lagardère Travel Retail did not have as good growth as Dufry, rising 97% to $733 million (€694 million). However, while business is yet to get back to 2019 levels, revenue in Q1 was 29% below the same period in 2019, whereas Dufry is 36% behind.

But there are hopeful signs. In a statement, Julián Díaz, CEO of Dufry Group who departs at the end of this month, said: “Comparing February year-to-date and April year-to-date, Dufry’s turnover has more than doubled. Within EMEA, the best performing region has been the Mediterranean, but also Southern Europe and the U.K. have significantly progressed.”

Much hangs on the coming summer booking period – in the Mediterranean and Central America/Caribbean in particular. Close to 2,000 of Dufry’s shops were open globally by the end of March, representing around 85% of stores and more than 90% of 2019 sales potential. It is now a question of filling them with travelers who are eager to shop.