Vaccination Programs Offer Dufry A Lifeline

Global travel retailer Dufry saw turnover tumble by 68% in the first quarter versus the same period last year, hit by a continuing lack of international shoppers in its stores around the world. But there is a glimmer of hope that summer trips will return in some regions.

Sales of $513 million (460 million Swiss francs) contrast sharply with $1.6 billion in Q1 last year, and $1.7 billion in the same period in 2019, before Covid-19 struck and travel bans were implemented.

A relatively better performance was seen in the Americas where sales were down 63%. In particular, the Hudson business in the U.S.—where a new CEO will take over in July—has seen store re-openings thanks to a restart of American air travel which has boosted duty-paid sales.

The Americas now account for more than half of Dufry’s revenue (52%) versus 44% in the first quarter of 2019. “The United States, Central America and the Caribbean are advancing due to successful vaccination campaigns and more flexible travel protocols,” noted Dufry in a trading update.

CEO Julián Díaz commented: “We are seeing encouraging signs for resuming travel trends and shop re-openings. Customer behavior indicates continued demand for travel and travel retail, and we are well positioned to accelerate sales with further reopenings.”

On Monday Britain, one of Dufry’s bigger markets, opened its English borders again for quarantine-free leisure travel to a limited number of ‘green list’ countries. And the European Union—which is developing certification to facilitate safe travel within the bloc—is also planning to open up to foreign tourists this summer. This would help Dufry’s business in sunshine hotspots like Spain and Greece.

So far, around 1,400 of the retailer’s stores have reopened—mostly in the Americas—representing close to 70% of sales capacity. Among them has been a “strategically important” duty-free operation involving Alibaba and Hainan Development Holdings in Hainan, an offshore duty-free province of China. By the end of May, Dufry expects to open a few more stores, representing about 75% of sales capacity.

In the first quarter, the strength of the duty-paid business and passenger requirements for convenience items was reflected in product category sales. Food, confectionery and catering saw the smallest decline (-71%) versus Q1 2019, while the worst hit segment was luxury goods, down 84%.

As Dufry waits for travel conditions to improve, the company has put in place an extensive cost-saving plan to reduce its burn rate. It says that for the full year 2021 it is on track to achieve savings of up to $747 million (670 million Swiss francs) compared to 2019. Airport rent reliefs for 2021 add up to another $335 million (300 million Swiss francs).

Other financial highlights in the first quarter included a refinancing to the tune of $1.8 billion with“no relevant” maturities before 2024, and a bolstered liquidity position of $2.47 billion. Net debt stands at $3.7 billion.