Dufry turnover falls -62% to $1.73bn in H1 2020 whilst 1,000 shops reopen

By Charlotte Turner |

This morning, the leading global travel retail operator reported a -62% decline in turnover to CHF 1,586.9 million/$1.73bn for the first half of 2020 as a result of unprecedented levels of disruption for its retail operations across its global network of stores, triggered by Covid-19.


Blaming international travel restrictions implemented by governments worldwide and operational shutdowns of airports, cruise lines and other channels, Dufry reported a -60.6% decline in ‘organic growth’.


As reported, Dufry has implemented several measures to stem cash outflow including cutting personnel expenses and successfully negotiating reductions in concession fees and MAG (minimum annual guarantee) with airport authorities and landlords.


As of today, Dufry expects to generate around CHF 1bn/$1.09bn in cost savings for full-year 2020, of which MAG relief1 contributes CHF 299m. In addition, actions are being taken at Capex and working capital level, with expected cash savings of around CHF 160m/$175m for the full-year 2020.



During the re-opening in the second half 2020 and depending on the recovery trajectory, Dufry expects positive average monthly cash flow of around CHF +60m in a -40% scenario and around CHF +10m in a -55% scenario, and cash consumption2 of around CHF -60m in a -70% scenario.


Since mid-June, Dufry began to reopen its retail operations gradually in close cooperation with airport authorities and landlords, based on what it describes as ‘single-location productivity scenarios’.

More than 1,000 of Dufry’s 2,400 shops have reopened in key locations such as the UK, Spain, Switzerland, Mexico, US, Turkey, Russia, Hong Kong, India, Cambodia, South Korea and Kuwait. At the end of August, Dufry expects to operate around 50% of shops, representing 70% of sales capacity.


Eighty-five percent of net sales were generated at airports in the first half of 2020, a slight decline compared to HY 2019 (88.1%), while other channels, especially railway stations, border, downtown and hotel shops, gained in importance.


Product mix remained relatively stable with perfumes & cosmetics, food & confectionery and wine & spirits being the predominant categories. The duty free vs duty paid split remained stable, representing 60.2% and 39.8% of net sales respectively.


Julián Díaz, CEO of Dufry Group.

Julián Díaz, CEO of Dufry Group.


Julián Díaz, CEO of Dufry Group, commented: “This is certainly a difficult time for both, the travel retail industry and our company. However, since mid-June we have started to see first signs towards a recovery, with travel resuming gradually and more than 1,000 of our shops globally in operation again at the end of July, based on our shop-by-shop re-opening plan.”


As reported, in the first half Dufry introduced initiatives to ‘adapt the company to the new market environment’ and safeguard its resilience going forward.


These include measures to reduce costs at all levels, several activities to strengthen Dufry’s financial structure, as well as a restructuring of the company and the implementation of a new simplified organisation as announced in June.


“I am confident that we have taken the right initiatives and that they will help us to emerge from the crisis with a solid position,” added Díaz.


“During the recovery and going forward the increased agility and faster decision making processes will allow us to adapt swiftly to the new and changing market requirements, drive sales and accelerate growth. By taking out one organizational level, the teams covering our global functions and the countries will increase efficiency and get closer to the market and our customers.



“I would also like to express my personal gratitude to our employees for their commitment during these difficult times. Without their strong support and dedication, the fast adaptation of the company and the changes applied would not have been possible. I also want to remember the colleagues we lost as a consequence of the pandemic and I wish a full recovery to our employees who were infected. We have taken all necessary steps to provide our employees with a safe working environment.


“Our health and safety protocols are an integral part of our stores globally to also protect our customers, while we continue to provide them with a first-class shopping experience. We see that passengers want to engage in travel retail as soon as airports and other locations are re-opening. We are looking forward to serving our customers globally with great service and attractive promotions.


“Our gratitude also goes to our shareholders, as well as all our business partners and stakeholders, who continue supporting the company on an ongoing basis and with renewed and strong relationships.”



For the Europe & Africa division organic growth slid -66.1%, resulting in turnover of CHF 558.9 million in the first six months of 2020 from CHF 1,725.5 million one year ago. From mid-June 2020 onwards, travel restrictions were lifted or eased and intra-European travel, especially in Southern and Central Europe as well as the UK, started to resume.


In Asia Pacific (APAC) & Middle East turnover amounted to CHF 236.0 million in the first half of 2020, versus CHF 623.8 million in the same period in 2019. Organic growth reached -60.4% with China and South Korea being impacted especially during Q1 2020, but resuming domestic and bilateral travel in Q2. Other parts of Asia Pacific and especially in the Middle East region were impacted mainly in the second quarter and are still continuing to be impacted with few shops open.


In North America turnover reached CHF 392.2 million compared to CHF 954.5 million in the first half of 2019. Organic growth was -57.9% in the period with a slowdown in both sectors duty free and duty paid, but especially in duty free, ‘which is exposed to international flight schedules’, said Dufry.

Domestic travel, which accounts for around 85% of the US flight movements, started to resume, while the Canadian business was still impacted by international travel restrictions. The North American business started an initiative through its Hudson brand to rollout vending machines featuring health and safety products across 27 leading airports in North America.


Through Central & South America turnover reached CHF 329.6 million in the first half of 2020 compared to CHF 761.8 million one year earlier, with organic growth coming in at -55.6%.


The division was the least impacted during the first semester, as most restrictions in the region only started in the second quarter. The cruise business, mainly part of Central & South America Division, performed in line with the overall division, despite cancellation of cruise itineraries as staff were still based on ships and high season would only have started later in the year.


Domestic travel, as well as border shopping and international flights within the region remained possible at limited levels, whereas most international travel outside the region was restricted.


The divisional turnover split saw Europe & Africa contributing 36%, APAC & Middle East 15%, North America 25% and Central & South America 21%. Global distribution centres accounted for 3% of HY 2020 net sales.



With respect to business development, Dufry slowed down its refurbishment program to reduce its capital expenditures, ‘without compromising on its re-opening and growth acceleration opportunities’, insisted the retailer.

Shops in London, Athens, Thessaloniki, Macau, Los Angeles, New York and Guayaquil, among others, were renewed, accounting for 6,350sq m or 1.4% of overall retail space operated by Dufry.


The company also continued expanding its operations and opening new shops, with most space increases executed during January and the first weeks of February. Important locations include Helsinki, Perth, Indianapolis, Calgary and Florianópolis (Brazil).


Total gross retail space opened during the first half accounted for 2,850sq m or 0.6% of overall retail space operated by Dufry.

Dufry says is has been able to negotiate with airport authorities and landlords to reduce its concession/MAG fees. Pictured here is Dufry CEO, Julian Diaz talking with Heathrow CEO, John Holland-Kaye.

Dufry says is has been able to negotiate with airport authorities and landlords to reduce its concession/MAG fees. Pictured here is Dufry CEO, Julián Díaz talking with Heathrow CEO, John Holland-Kaye.


Lease expenses amounted to CHF -75.7 million in the first half of 2020 compared to CHF -633.8 million in H1 2019 (-88.1% compared to the same period last year). As previously mentioned, expenses decreased due to the lower level of sales and due to Covid-19 related minimal guaranteed amounts (MAG) relief negotiated with airport authorities and landlords.


Up to 30 June, 2020, Dufry was able to close several agreements releasing partially or totally about CHF 161.8 million in MAG payments. Meanwhile, the management remains in negotiations with other lessors reviewing the lease terms, in order to accommodate these according to the market circumstances beyond 30 June.


In relation to these on-going negotiations, Dufry has already received offers granting further MAG relief in relation to the first half of 2020 for CHF 137.0 million, which, if and when such rent concessions are signed, will result in a de-recognition of lease obligations of the same amount.


Personnel Expenses amounted to CHF -423.0m in the half-year 2020, down from CHF -618.6 million one year earlier, representing a decrease of CHF 195.6 million (-31.6% compared to the same period last year) driven by the efficiency program, which includes reducing costs at all levels, making use of government support schemes whenever possible, as well as the implementation of voluntary salary reduction schemes, also supported by Dufry’s Global Executive Committee and Board of Directors. Personnel Expenses include CHF -62.7m for restructuring and CHF 34.4m from various government support schemes.


Cash flow metrics were also impacted by the lower level of sales. Adjusted operating cash flow reached CHF -103.5m in the first six months of 2020 compared to the CHF 409.0m in H1 2019.



Overall concession fees, i.e. variable components such as lease expenses and fixed components such as lease payments, amounted to CHF -521.5m, representing a reduction of -57.7% compared to H1 2019.


Capex was significantly reduced from CHF 125.3m in H1 2019 to CHF 60.0m in H1 2020, as the company put Capex investment on hold as much as possible since March 2020. Equity Free Cash Flow stood at CHF -749.1m in the first half-year 2020 compared to CHF 140.4m in the previous year.


In April, Dufry announced a comprehensive set of initiatives to strengthen its capital structure and liquidity position to support the company, thus allowing it to ‘sustain a prolonged period of operational disruptions and reinforce its competitive positioning in the longer term’, it said.


In total, the new financing measures improved Dufry’s liquidity position from CHF 1,258.5m as of 31 December, 2019 to CHF 1,583.7m as of 30 June, 2020. Net Debt amounted to CHF 3,659.4m at the end of June 2020 compared to CHF 3,101.9m at the end of December 2019.


“Giving the current context and the low visibility to provide business forecasts, the company had already withdrawn guidance for full-year 2020 in its Q1 Trading Update in May,” said Dufry. “Dufry has defined cost containment measures for different scenarios based on turnover development in 2020 and information made available by different associations and independent data providers of the travel retail and airline industry.


“The scenarios consider a -40%, -55%, and -70% turnover decline for full-year 2020 compared to full-year 2019, and are used to steer the company through a time of uncertainty and implement necessary action plans to reach required cost reductions, safeguard liquidity and re-open the business in a cash-preserving way. The scenarios do not represent a company guidance.”


1MAG relief refers to the waiving of fixed rent components and implementing variable concession schemes instead, or to adjusting fixed MAGs to lower passenger numbers, scheduled flights and operating hours.


2Cash consumption includes personnel and operational expenses, working capital changes, capital expenditures, interest and other finance expenses, as well as tax payments.


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