Dufry Group’s +53% organic growth boosts confidence in recovery trend

By Charlotte Turner |

Dufry has reported organic growth of 53.2% in 2021 year-on-year, with turnover reaching CHF 3,915.4 million/US$4,215 million, providing the retailer with ‘strong confidence in the overall recovery trend’ it said.  

 

While the company insists that it does see strong demand for the resumption of travel – with shopping as an integral part of the overall travel experience – it has not yet provided details on the potential impacts to the business [including newly opened shops at Pulkovo Airport in St. Petersburg] from the ongoing conflict between Russia and Ukraine.

 

“Given limited visibility and information currently available to management regarding the geo-political environment, pandemic-related developments, government responses and timeline for lifting of measures, Dufry does not provide guidance for 2022 in line with past practice,” said the company in a statement issued today.

 

WESTERN HEMISPHERE REBOUND IN TRAVEL

Dufry said its full-year 2021 performance was characterised by a rebound of travel, predominantly in the Western hemisphere. The company also highlighted its solid Equity Free Cash Flow of CHF -33.4 million for full-year 2021, representing a 73.4% conversion rate on incremental turnover 2020 to 2021.

 

 

Julián Díaz, CEO of Dufry Group, commented: “In an environment of gradual recovery for the industry and with travel resuming at different speeds in individual countries and regions, Dufry has continued to flexibly adapt its ways of working to the ever-changing requirements.

 

“Supported by the resilient willingness of our customers to travel and their ongoing propensity to visit our stores, our turnover saw a reassuring acceleration through the course of the year.

 

“We had already defined initiatives in 2020, such as negotiating MAG reliefs and tightly controlling personnel and other expenses, and continuously applied these in 2021 as well.

 

SAVINGS: ‘WELL AHEAD OF EXPECTED LEVELS’

“This allowed us to save CHF 1,919.7 million in total in 2021, well ahead of the expected levels. We also reached a very solid liquidity position at year-end of CHF 2,243.9 million.

 

“We see encouraging signs for the ongoing recovery of the industry and our business performance as vaccination levels increase, passenger traffic accelerates, and our sales improve – also supported by higher spend-per-passenger compared to before the pandemic. The overall trends to ease cross-country and domestic air travel continued and were gradually extended.

 

“Dufry is well positioned to drive recovery and accelerate growth going forward.”

 

As reported, Díaz will step down as CEO on 31 May 31, 2022.

 

DIAZ EMBARKS ON NEW CHAPTER

“I would like to express my gratitude to all our stakeholders and particularly to the Board of Directors and all colleagues at Dufry for the support I have received during the past eighteen years,” he said.

 

“Without the strong dedication for execution and tireless commitment of every single employee, we could not have built the leading player of our industry. I am immensely grateful for the opportunity I had to lead and contribute to the development of this great company, and I wish the Dufry family a prosperous future.”

 

In 2021, Dufry’s category mix mirrored re-opening patterns, with the duty paid segment being driven by faster recovering domestic and intra-regional flights. Perfumes & cosmetics continued to drive sales, followed by food & confectionery and convenience product offerings.

 

Gross Profit margin stood at 56.5% for full-year 2021 and a further normalisation is expected in line with business recovery, said Dufry.

 

“Retail margin already proved to be very resilient and saw an increase of 1.2% compared to 2019 due to strong demand of returning travellers and supported by the higher share of duty-free for UK inbound customers.

 

TRBusiness interviewed Díaz for last year’s indispensable Top 10 Operators Report.

 

 

DUFRY IN HAINAIN

“During 2021, margin was mainly impacted by the temporary supply of Dufry’s Hainan collaboration in China through its Hong Kong-based distribution centre.”

 

In line with easing of travel restrictions Dufry continues to re-open its retail businesses gradually, following what it calls ‘single-location productivity scenarios’.

 

“I would like to express my gratitude to all our stakeholders and particularly to the Board of Directors and all colleagues at Dufry for the support I have received during the past eighteen years,” he said.

“I would like to express my gratitude to all our stakeholders and particularly to the Board of Directors and all colleagues at Dufry for the support I have received during the past eighteen years,” said Julián Díaz.

By the end of 2021, around 1,900 shops globally were open, representing around 88% in sales capacity compared to full-year 2019. At the end of March, Dufry expects to operate more than 1,970 shops, representing above 90% of sales capacity.

 

The emergence of the Omicron variant and related restricted measures re-imposed by selected governments caused some slowdown in January and February, but all regions have started to trend upwards already in line with the easing of restrictions in many countries.

 

NEW SCIENCE-BASED TARGETS

Meanwhile, Dufry continues to focus on strengthening its sustainability approach and has defined science-based-targets (SBT) to achieve climate neutrality by 2025 for scopes 1 + 2 and to considerably reduce carbon footprint of scope 3 emissions by cooperating with suppliers and logistic partners by 2027 and 2030 respectively.

 

Dufry also launched a new sustainable product identification initiative across 128 airports and 171 shops globally, and evolved its diversity & inclusion engagement, among other major initiatives. Further information is provided in Dufry’s 2021 Sustainability Report.

 

In total, Dufry opened 9,800sq m of new shops and refurbished 19,250sq m of sales space, corresponding to 2% and 4% of total space respectively. In addition, Dufry was involved in the opening of the Global Duty Free Plaza at the Mova Mall in Hainan – in collaboration with Alibaba and Hainan Development Holdings.

 

REGIONAL PERFORMANCE BREAKDOWN

Turnover in Europe, Middle East and Africa was CHF 1,723.8 million in 2021 from CHF 1,144.5 million one year ago. EMEA saw a significant step-up in June and gradual improvement ever since based on resuming of travel within the region and transatlantic routes.

 

Best performing was the Mediterranean, including Turkey and Greece, Eastern Europe, Russia, Middle East, and Africa benefitting from leisure demand and more flexible travel protocols compared to other countries in the region.

 

Also, France, Italy, Spain, Switzerland, and the UK saw an uptake since June as vaccination campaigns were progressing and authorities were implementing more convenient intra-European as well as transatlantic travel protocols.

 

Departure destinations with inbound travel to UK benefitted from new regulations related to Brexit and duty-free quotas. Towards the end of the year, re-imposed restrictions, and limited alignment between governments around the emergence of the Omicron variant resulted in a slight slowdown.

 

Asia Pacific’s turnover reached CHF 99.0 million in 2021 from CHF 160.0 million in 2020. APAC is still largely impacted by the respective governments’ zero-case approach, and borders for inbound and outbound travel are mostly closed.

Dufry's turnover in the Asia Pacific region reached CHF 99.0 million in 2021 from CHF 160.0 million in 2020

Dufry’s turnover in the Asia Pacific region reached CHF 99.0 million in 2021 from CHF 160.0 million in 2020

Accordingly, shops in Dufry’s Asia-Pacific locations such as Hong Kong are closed or operating at very low levels in line with flights and passenger movements. Since the end of 2021, Australia, Cambodia, Singapore, Malaysia, and Macau started to release restrictions and to allow a soft opening of travel. As soon as restrictions are further being lifted, demand is expected to show a fast rebound.

 

The Americas’ turnover stood at CHF 1,728.5 million in 2021 versus CHF 1,141.7 million in 2020. North America, especially the US, performed above group average due to the higher exposure to domestic travel. Intra-regional travel from the US to Central America as well as the opening of the transatlantic route in November were also supportive.

The Americas' turnover stood at CHF 1,728.5 million in 2021 versus CHF 1,141.7 million in 2020.

Dufry’s Americas turnover stood at CHF 1,728.5 million in 2021 versus CHF 1,141.7 million in 2020.

The performance was driven by Hudson convenience stores, food and beverage and other duty-paid offerings. Central America and Caribbean, including Mexico, Dominican Republic, and the Caribbean Islands, were performing robustly as well, driven by intra-regional travel from the US and South America as well as international travel as more flexible travel conditions met continued demand.

 

The cruise business, located in the region, continued to be impacted. South America started to trend upwards in the second half 2021, especially in Argentina, Colombia, and Ecuador, in line with vaccination progress and an improved health situation.

 

Performance of distribution centres was impacted by temporary supply of Dufry’s Hainan collaboration in China through its Hong Kong-based distribution centre, which largely transitioned to the local supply chain at the beginning of 2022.

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