Executive Vice-Chairman & CEO Colm McLoughlin says DDF could hit $2bn in sales by year-end if the current growth trend continues.

Dubai Duty Free (DDF) has reported a +10.6% rise in sales equating to AED155m ($42m) up to 18 March 2018 versus the same period last year.

As reported, DDF registered record-breaking annual duty free sales of $1.93bn in 2017.

This exceeded 2016’s sales turnover of $1.85bn by 5.6%.

Speaking to TRBusiness, DDF Executive Vice Chairman and CEO Colm McLoughlin said: “The start of this year has been absolutely fantastic. We budgeted more than we did last year of course, but we did not budget this high.

“We are [more than] 10% up on last year, but 8.2% up on our budget so far this year. If the trend continues for the 12 months, we will crack $2bn by the end of the year.”

SPH AVERAGED $38

DDF set a new monthly sales record of over $219m in December in a successful 2017.

McLoughlin, who revealed DDF gave away $25m in prizes and 34 motor cars as part of its Finest Surprise promotion, explained: “It was the best year we have ever had from a sales perspective.

“We have 5,900 staff working for us and sold 73 million items of merchandise last year. We did 27.1 million transactions on our registers, but sales per day worked out at 75,000 transactions, so that held its own.

“Our penetration rate also held its own and average sale per departing passenger was a little up on the previous year averaging out at $38. We are very happy.”

On the product side, perfumes and cosmetics (24% of total sales) remains DDF’s biggest category.

Liquor increased last year by around 14% and tobacco reported growth between 9%-10%, but one trend stood out, according to McLoughlin: “Last year, for example, we had sales of AED241m ($66m) on Apple Products.

“Apple now accounts for 45% of total electronic sales. At one point it was telephones and cameras leading the way.”

Pressed by TRBusiness on the company’s goal of reaching $3bn in sales by 2022, McLoughlin said: “The objective is still in our heart, but it is unlikely to be in 2022 and more like 2024.”

Perfumes and cosmetics remains DDF’s largest sales category.

According to McLoughlin, the prediction is based on operations at the new Al Maktoum International Airport in Dubai World Central.

He explained: “At present, the capacity of that airport is increasing from five million a year to 27 million. The next big jump for that airport will be to 135 million passengers, but that has now gone out a little bit from 2020 into about 2023 of 2024.”

Meanwhile, DDF is set to continue benefitting from last year’s change in entry visa regulations for Russians visiting the United Arab Emirates. This resulted in a traffic increase of +6.4% to 900,000 at Al Maktoum International Airport in 2017.

Currently, Russians receive a 30-day entry visa on their first visit, which is renewable on one further occasion for 30 days.

Mcloughlin said: “Russians had stopped coming mostly because of the exchange rate being very bad and the rouble being very weak. Now, Russian traffic is building up again which is very positive.”

That said, the buying habits of Russian consumers are not like they were 10 years ago. “The Russian business may be beginning to come back, but it is different to how it was,” he noted.

“I remember setting up a section of car accessories for Russian passengers around a decade ago. Now they are very much like other passengers buying luxury watches, gold, alcohol and cigarettes.”

CHINESE CONSUMERS

The importance of Chinese consumers, which account for 4% of traffic and 9% of total business, must not be underestimated.

Chinese travellers are also granted visa on arrival to the United Arab Emirates after approval was granted in 2016.

“The big story everywhere in the world is Chinese traffic,” McLoughlin emphasised. “The more Chinese traffic we have the better as they are spending way above the average.”

He added: “We do promotions all the time on products we know Chinese travellers like. These include certain kinds of make-up, watches, liquor and the ever reliable Chunghwa cigarettes.

“Chinese traffic is very important, which is reflected in the fact we have 651 Chinese staff working for us. Fifteen years ago we had none and 12 years ago around 12.”

In terms of commercial-related renovations and expansions, last year resulted in developments at Dubai International Airport and Al Maktoum, where retail space increased from 2,500sq m to almost 4,500sq m.

Focusing on Dubai International Airport, McLoughlin said: “Regarding the walkway between Concourses B and C, the latter has undergone refurbishment.

“We have opened several new shops including liquor and tobacco and perfumes and cosmetics outlets and a sunglass store. It will be totally finished in around three months and add about 3,000sq m of retail space on to everything. It already looks terrific which is reflecting in our revenue.”

Average sale per departing passenger was $38 for Dubai Duty Free in 2017, slightly up on the previous year.

TAX REGULATIONS

Reflecting on the introductions of excise tax in the United Arab Emirates on energy drinks, soft drinks and tobacco (effective 1 October 2017) and Value Added Tax (VAT) of 5% from 1 January, McLoughlin remarked: “We are now charging VAT on arrivals sales, which will impact our [arrivals duty free] business considerably.

“We have estimated it is going to cost us about AED100m ($27.2m) in arrivals sales, but expect to gain in departures which is 90% of our business.”

With duty free goods sold to departing passengers from Dubai International and Al Maktoum exempt from VAT, McLoughlin commented: “From a nuisance point of view we must now ask everyone for boarding cards in departures which is something we never did in the previous 35 years.

“Unless people have their boarding cards – everybody who is flying will have them so this shouldn’t be a problem – we will charge them VAT. We are also charging VAT to departing crew members.”