China Duty Free Group (CDFG) has focused on shoring up its primary business lines and pursuing ongoing construction projects.

China Duty Free Group (CDFG) sees profits decline 11.36% in H124 as it looks to stabilise the offshore duty-free business in Hainan and continue to improve its domestic and international business layout.

CDFG’s revenue decreased by 12.81% from RMB35.858bn ($5.04bn) for the six months ended June 30, 2023, to RMB31.265 billion ($4.41bn) for the six months ended 30 June, 2024, mainly due to the year-on-year decrease in revenue from sales of merchandise during the Reporting Period.

Profit decreased by 11.36% from RMB4.137bn ($580m)  for the six months ended 30 June, 2023 to RMB3.667bn ($502m) for the six months ended June 30, 2024, mainly due to a year-on-year decrease in sales revenue during H124.

In the second half of 2024, the company said it will continue its efforts to stabilise the offshore duty-free business in Hainan and continue to improve its domestic and international business layout, promote balanced development of online and offline businesses, and focus on the construction of complex projects.

With the relaxation of the duty-free operation permits, the operating entity for the port arrival and departures duty-free stores will be determined by way of bidding, while that of the offshore duty-free stores in Hainan Province shall be determined by way of competitive negotiation.

Project development

China Duty Free Group (CDFG) pushed ahead on the construction of key projects and integrated travel retail complexes, contributing to the development of the Hainan Free Trade Port.

During the reporting period, the hotel project on plot two of phase one of Sanya International Duty Free Shopping Complex Project completed the hotel sample section review and pushed ahead with construction of the core tube structure.

The company’s gross profit decreased by 4.75% from RMB10.754bn ($1.52bn) for the six months ended June 30, 2023 to RMB10.243bn ($1.44bn) for the six months ended 30 June, 2024, mainly due to a year-on-year decrease in sales revenue during H124.

Phase three of Sanya International Duty Free Shopping Complex Project obtained the construction permit for Area A and the planning permit for Area B and completed the plus minus zero structure construction of the civil defense area.

Plot one of Haikou International Duty Free Shopping Complex Project pushed ahead the construction of curtain walls, electromechanical works, and fine decoration, while plot four pushed ahead the construction of main structure.

Chinese travel soars

According to statistics from the National Immigration Administration, from January to June 2024, a total of 287 million exit-entry travelers were inspected, marking a 70.9% increase year-on-year and recovered to 83% of the same period in 2019.

This figure encompassed 137 million residents from the Chinese mainland, 121 million residents from Hong Kong SAR, Macao SAR and the Taiwan region, and 29.22 million foreign nationals.

CDFG noted the duty-free industry in China has entered an orderly competition stage, noting it will focus on its principal business (duty free and travel retail), major projects and key markets, while striving to improve core business capabilities and create a new pattern for the development of travel retail.

CDFG noted the duty-free industry in China has entered an orderly competition stage, noting it will focus on its principal business (duty free and travel retail), major projects and key markets, while striving to improve core business capabilities and create a new pattern for the development of travel retail.

The competition in the industry has become increasingly fierce. Many domestic enterprises have applied for duty-free operation permits, and foreign duty-free giants want to take a share from the duty-free market in China. The intensifying market competition has brought uncertainties to the Company’s sustainable development.

CDFG said it also faces the risk of investment in strategic projects falling short of expectations, and will focus on its strategic objectives, strengthen the management of medium-term and long-term planning and annual investment proposal, control the scale and the pace of investment from an overall and macro perspective, and maintain an overall objective understanding and vigilance of investment risks.

Hainan

In the first half of the year, the offshore duty free market in Hainan faced pressure on sales.

According to statistics from Haikou Customs, from January to June 2024, the offshore duty-free sales amounted to RMB18.46 billion ($2.46) representing a year-on-year decrease of 29.9%; and the number of duty-free shoppers was 3.361 million, representing a year-on-year decrease of 10%.

On 28 May 2024, Hainan released the Measures to Further Promote the Integration of Culture, Sports, Tourism, Commerce, and Exhibitions to Expand Consumption in Hainan Province.

From January to May 2024, Hainan set aside RMB125m ($17.6m) as offshore duty-free amount and “air ticket equals admission ticket” consumption vouchers, which CDFG said had played a positive role in stimulating the market atmosphere.

These were/are 20 specific measures to support offshore duty-free enterprises to boost consumption, support integrated cultural, sports, tourism, and commerce promotional activities, continue to issue consumption vouchers, and support inbound tourism.

Duty free promotion

 CDFG focused on strengthening its marketing and promotion by creating the IP “C-LOONG” for the Year of Dragon and launching marketing activities such as the 4th cdf Watch Carnival and cdf Global Season of Special Offers.

The aim of the promotions was to create new immersive, experiential, and interactive shopping scenarios and unique shopping experience tags to ignite consumer enthusiasm for duty-free shopping.

In addition to participating in industry events such as the China International Consumer Goods Fair and the TFWA Asia Pacific Exhibition & Conference, CDFG also organized the 2024 Annual Procurement Conference and the Seminar on the Development of the Duty-Free Industry in China.

The cdf’s “Mystery” series brand image advertisement won the 2024 German National Design Award.

Currently, the number of cdf members exceeded 35 million, and CDFG highlighted the strength of its technological innovation by integrating the cdf data center, which standardized its data warehouse, data standards and data security management.

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