Over the first nine months of the year, LS Travel Retail sales were up by +4.8% like-for-like (+9.9% on a reported basis) – but LSTR’s parent division, Lagardère Services (LS), saw a marginal like-for-like growth of +0.7% due to a contraction of LS Distribution, the other component of LS.

 

LSTR’s momentum – particularly in the duty free and food services segments – was helped by growth in passenger traffic, consolidation of acquisitions [such as Gerzon in Amsterdam and Airest in Italy], and the modernisation of shops and the roll-out of new concepts.

 

Global passenger traffic at the end of July 2014 hit +4.6%: +5.1% in Europe, +2.8% in North America, and +4.7% in Asia-Pacific.

 

On a like-for-like basis, LSTR’s activity was up significantly in Italy (+20.1%), Asia-Pacific (+10.1%), North America (+8.8%), the UK (+6.1%), Czech Republic (+4.6%) and Bulgaria (+23%).

 

LS Distribution, on the other hand, has had a difficult year, with revenue down -5.4% like-for-like over the first nine months [-1.2% excluding the effect of the end of tobacco sales in Hungary (in July 2013)]. Diversification efforts and the market’s consolidation reduced the effect of the press market’s decline.

 

LSTR ACCELERATES IN Q3

In the third quarter, growth at LSTR shifted up a gear to+5.8% like-for-like (+13.2% on a reported basis).

 

LS says that despite the impact of the Air France strikes in September, the key market of France had a good performance, with the duty free segment up +6.9% and the ‘travel essentials’ segment up +4.3%. The latter, says LS, was due to “the impact of the change in product mix, thanks to modernisation and diversification efforts”.

 

In Europe (excluding France), Italy was up +12.4%, in line with forecasts, with the ramping-up of activities in the Rome airports. The UK was up +8.8% thanks to the recovery in passenger traffic.

 

In Central Europe, sales rose significantly (+8.8% in Romania, +30.6% in Bulgaria, and +3.9% in Czech Republic), driven by growth in Food Services and Duty Free. Meanwhile North America grew by +7.1%) especially in food services (Los Angeles airport) and Asia-Pacific was solid  at +8.9%.

 

Aware of the distribution drag that is hindering LS, in a presentation to analysts yesterday Lagardère Group’s Dominique D’Hinnin (left), Co-Managing Partner said: “Our primary target is to divest these activities as soon as possible. We have some potential buyers… but expect more (deals) next year rather than this year.”

 

SINGLE BLOCK SALE ABANDONED

Just this week, LS kicked off its disposals in Switzerland. Dag Rasmussen (below right), CEO of Lagardère Services commented yesterday: “We abandoned the idea of selling LS Distribution as a whole because we had lengthy discussions (with buyers) but we did not agree on the price… we did have some offers. We have started with Switzerland which is a reasonable sale and we are launching a process for all the remaining companies.”

 

The US operation may also stay within the company as it is more complex than the European business, and “makes good money” according to D’Hinnin.

 

OVERALL LS BUSINESS

Overall, Lagardère Services generated net sales of €2,888m ($3,590m) in the nine months to September 2014, marginally up by +0.7% (like-for-like) and +3.3% (reported).

 

The difference between these two rates is chiefly attributable to a positive scope effect of +€107m: +€149m resulting from travel retail acquisitions [mainly Gerzon in Amsterdam and Airest in Italy], but partially offset by €42m resulting from the July 2014 disposal of Payot bookstores in Switzerland ( a -€11m impact) and from the deconsolidation of Relay operations (a -€26m impact).

 

The latter move means that as from early September 2014 Relay, in the majority of railway stations in France, will operate as a joint venture with rail operator SNCF. The impact on sales figures of the switch to equity method for this JV should come close to €320m for a full year says LS. There was also a negative foreign exchange effect on the division (-€34m).