Dufry sales up 9% to $883m in Qtr1

By Doug Newhouse |

Dufry has reported a sales turnover rise of 9% to CHF.775m ($883m) in the first quarter of 2014 – at constant foreign exchange rates.


The leading global DF&TR retailer also reported today that EBITDA reached CHF.89.1m ($101.5m) and EBITDA margin reached 11.5% in the quarter – traditionally the lowest quarter in the annual calendar – while cash flow before working capital grew 15.6% to CHF.93.6m ($106.6m). Dufry said the increase also benefited from both organic growth and the acquisition of Hellenic Dufry Free.


The company also added that organic growth was also impacted by currency volatility with selected nationalities such as Brazilians and Russians alongside the shift in Easter holiday dates. [The appreciation of the Swiss Franc versus the US Dollar translated into minus -3.8% in the first quarter.


But it was ‘a good quarter’ according to an extremely positive Dufry Ceo Julian Díaz: “Profitability and cash generation were very healthy, even as we have invested in many new projects resulting in higher capital expenditure and net working capital. Only turnover growth was held back by foreign exchange movements and the shift of Easter holidays.


“As mentioned many times, we execute on a number of projects in 2014 and we are running with full speed to execute these important projects in Brazil, Asia, and the US. In Brazil, the core of the new operations will be located at Sao Paulo Guarulhos, Brasilia and Viracopos International Airports.


“We are putting all our efforts and working to open the shops ahead of the Football World Cup. As for Asia, another region where we are going to increase substantially our footprint, all plans are on track. We have already started operations in Bali, Indonesia, in Astana, Kazakhstan, Sri Lanka and South Korea. The remaining operations to be opened in Taiwan and China, should be fully operational by the beginning of the second half of 2014.



Dufry at Sao Paulo Airport arrivals – the powerhouse of The Americas business.




“Regarding our operations in US & Canada, the pipeline keeps healthy as we opened already in the first quarter 17 shops with almost 1,400sq m in several airports. It is worth noting that these new shops already reflect the new Hudson model with new logo, shop layout and assortment.


“We also opened brand boutiques in Newark, New York, Chicago and Sanford. Looking ahead, our project pipeline still shows several opportunities for expansion, being as duty paid or duty free with total area of almost 3,600sq m to be opened almost entirely in 2014.


“Last, but not least, our Hudson operation continues to deliver excellent results and our plan is to roll out the concept further outside US & Canada. Today we are present in 12 countries including Brazil, where we opened our first Hudson shop earlier this year in April.


“In addition, we have been awarded to operate nine Hudson shops with a total retail space of 1,900sq m at five airports in Spain that will open along 2014. Our target going forward is to double the number of Hudson shops internationally to about 200 shops by 2015 and for that we have developed an internal group that will focus all the effort and expertise to achieve it.


“Regarding the travel retail industry, we continue to see a positive scenario for the economy and the travel retail in general. So far the number of international passengers grew by 6% in the year and is expected to grow by 4% in 2014.


“With several new projects expected to become operational in Q2 2014, there will be growth momentum building up in the second half of 2014 and in 2015 we should see the full benefit of this additional retail space. We are committed to our strategy of profitable growth organically or through acquisitions and we continue to develop new projects.”



Despite intense financial pressures on the local currency, Dufry has performed well at Interbaires in Buenos Aires Ezeiza Airport.




As reported above, sales turnover in Swiss Francs reached CHF.775m ($883m) from CHF.736.4m ($839.2m) in the first quarter of 2014, a growth of 5.2%, after a -3.8% foreign exchange translational impact, driven by the appreciation of the Swiss Franc in the period.


Turnover in Region EMEA & Asia grew by 31.4% in Q1, reaching CHF.239.8m ($272.3m) from CHF.182.5m in the previous year. Dufry said: “Besides the consolidation of the business acquired in Greece in April 2013, other operations in the region performed solidly as well.


“In Europe, France and Spain had strong growth. Africa showed [a] positive performance as Morocco and Ivory Coast had double-digit sales growth and helped mitigate the lower results in Egypt. In Eastern Europe, Serbia and Armenia performed well, while operations in Russia were impacted by the depreciation of the Russian Rouble and the political situation in the Ukraine.


“In Middle East and Asia, growth was strong as a combination of like-for-like in the existing operations, especially in China and Cambodia, as well the effect of the first openings in Asia”.



Dufry CEO Julian Díaz believes that the real legacy left by the FIFA World Cup in Brazil this summer will be the improved infrastrucure for future tourism in Brazil, as he told TRBusiness in an exclusive interview last March.




Turnover in Region America I stood at CHF.174.7m ($199.1m) in the year to March, down from CHF.190.5m in the same period in 2013. Dufry says the performance of this region was affected by the devaluation of local currencies, especially in Uruguay, where like-for-like sales were negatively impacted by the reduction in the purchasing power in local currency terms.


In addition, Argentina and the Caribbean operations had a negative impact by a calendar effect from Easter, which in 2013 took place in the first quarter and this year moved to the second quarter. Dufry also emphasised that ‘it’s important to mention’ that despite the devaluation, it still registered growth in sales of 14% in America I when analysed in local currencies.


Turnover in Region America II of CHF.138.4m ($157.7m) also fell in the first quarter of 2014 compared to CHF.158.6m in the same period in 2013. When measured in Brazilian Real, sales continued to grow, as in the previous quarters, but Dufry notes that the devaluation of the local currency versus the USD of 18% in the first quarter masked the positive performance.


On the business development side, the retailer says it is ‘well on track’ with the expansion of its operations in the country, most notably in Sao Paulo and Brasilia, where in the latter the first Hudson News shops were opened. Dufry expects to be operational in these locations ahead of the Football World Cup in June.


Meanwhile, sales turnover in Region United States & Canada grew by 13.2% in constant foreign exchange rates. In Swiss Franc terms, turnover came to CHF.205m ($233.6m)  in the first quarter of 2014 from CHF.189.8m in the same period in 2013.


Dufry adds that the region managed to ‘largely outpace the increase in the number of passengers’ by improving the retail operations and expanding its footprint in the United States, where 1,400sq m of space has been added so far in the year.



Dufry at Chicago O’Hare Airport in the brand new Westfield retail development.



GROSS PROFIT: +5.6% TO $521M

Gross profit grew by 5.6% and reached CHF.456.8m ($520.6m) in the first quarter of 2014 versus CHF.432.7m one year before. Gross profit margin expanded by 10 basis points to 58.9%, notwithstanding the negative impact from the consolidation effect of the business in Greece, which Dufry says has ‘below average gross margin’.


Excluding this effect, the retailer says its gross margin improvement was 60 basis points, reflecting ‘the good development’ from the reorganization of the retailer’s Procurement and Logistics structures, as announced in 2013.


Meanwhile, selling expenses as a percentage of turnover remained practically stable at 24.2% in the first quarter of 2014, from 24.1% in 2013. In absolute terms, they reached CHF.187.2m ($213.3m) in 2014 versus CHF.177.7m one year earlier.


Net financial expenses reached CHF.23.3m ($26.5m) in the first quarter of 2014 compared to CHF.30.4m in the fourth quarter of 2013. As reported, in the last quarter of 2013, Dufry entered in a new credit line with lower finance costs in order to reduce its local facility existing debt in Greece.


The retailer added: “It is also worth mentioning that Dufry had a non recurring cost of CHF.5m ($5.6m) associated to this transaction last year. For 2014, Dufry expects a reduction in yearly financing costs of CHF.10m ($11.3m) on a comparable basis.


In addition, the retailer reported that cash flow before working capital changes reached CHF.93.6m ($106.6m) in the first quarter of 2014 versus CHF.81m one year earlier.



Hudson News stores have now opened in the airports of Sao Paulo and Brasilia.




In the year to March, capital expenditure stood at CHF.49.3m ($56.1m) and free cash flow reached CHF. 21.4m. Dufry adds that the increase in capital expenditure of CHF.27.8m ($31.6m), when compared to the first quarter 2013 results from several shop openings expected in 2014 – namely in Brazil and Asia.


Net debt at the end of March 2014, was CHF.1,726.6m ($1,967.82m) compared to the CHF.1,753.4m ($1,998.36m) at the end of December 2013.


[TOP IMAGE: Dufry in Mexico City Airport].


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