Dufry Group turnover plunges -71.1% in 2020; company sets sights on protecting liquidity and accelerating growth in Asia and digital channels in 2021

INTERNATIONAL. Leading travel retailer Dufry Group today reported financial results for 2020, with turnover falling -71.1% year-on-year to CHF2,561.1 million (US$2,737 million).

The company noted that performance was “impacted by the unprecedented level of disruption in its retail operations, driven by international travel restrictions implemented by governments worldwide and temporary operational shut-downs of airports, cruise lines and other channels” due to COVID-19.

Organic growth for the year stood at -69.8% with like-for-like sales down -67.2% due to reduced passenger traffic across most airports and other travel-related channels globally. Net new concessions represented -2.6%. The translational foreign exchange effect in the period was -1.3% mainly as a result of the US Dollar weakness.

Despite the shift to more domestic and intra-regional travel, with declines in international and business travel – the category mix remained nearly unchanged compared to FY2019 with the highest demand for perfumes & cosmetics, followed by food & confectionery.

By the end of February, almost 55% of Dufry stores were open, representing 60% of sales capacity, including the “strategically important duty free operation in Hainan”, with Hainan Development Holdings.

Dufry said it expects to be “well positioned for reopening and growth acceleration beyond the current crisis”. Based on the forecasts for travel recovery, Dufry said that turnover could fall by between -40% and -55% in 2021 compared to 2019.

Dufry Group CEO Julián Díaz said: “While Dufry has evidently been impacted by the COVID-19 pandemic as have many other companies in the travel and tourism industry, I have seen a deep emotional engagement and a strong determination by all our employees to overcome this challenging situation. From the Board of Directors, to our management teams and throughout all levels of our organisation, we have worked in close alignment to find, plan and implement the right solutions to mitigate the impact of this crisis and lay the foundations upon which we will emerge as a stronger company.
“This positive attitude and dedication has allowed us both to adapt the company to the new market environment very quickly and to implement important and resilient cost savings, thus preparing our organisation for the recovery and beyond. In parallel, we have succeeded in putting the company on solid financial ground and seized opportunities, which provide remarkable growth potential and contribute to the future development of Dufry.

“With the successful financing measures implemented in 2020, the support of existing and important new shareholders, the finalisation of our reorganisation as well as the financial and managerial flexibility to engage in strategically relevant initiatives and growth opportunities Dufry is well positioned to drive recovery and growth acceleration beyond the current crisis.

“More than ever, my immense gratitude goes to our employees and management teams for their ongoing motivation, dedication and extraordinary efforts, in supporting the restructuring, negotiating with our business partners and securing the financial strength of the company. We have created a solid and resilient base on which we can build going forward.

“On behalf of the whole company, we also want to remember the colleagues we have sadly lost and extend our condolences to their families, while wishing any colleagues who suffered with the virus a swift and full recovery.”
Cost-cutting measures delivered savings of CHF1,312.1 million (US$1,402 million) in the year, significantly ahead of the initial target of CHF1 billion. This included with MAG relief of CHF551.4 million, personnel and other expense savings CHF527.3 million and CHF233.4 million respectively.

Cash consumption fell to CHF45.7 million (US$48.8 million) in the second half compared to an expected CHF60 million monthly average.

Net debt amounted to CHF3,344.2 million (US$3,573 million) at the end of December 2020 compared to CHF3,102.0 million in December 2019.

Gross profit reached CHF1,377.3 million (US$1,471 million) in 2020, down by -74.1%, reaching a gross profit margin of 53.8%. Margin was affected by the turnover mix from the retail versus the wholesale business, short-term inventory management through wholesale and promotions, and a higher duties and freight ratio.

One-time inventory write-offs related to the heavily impacted cruise business and liquidation programmes in 2020 accounted for 350 basis points. Purchasing prices have not been affected by the pandemic and Dufry said it expects a normalisation of its gross profit margin in line with sales recovery.

The adjusted operating loss (adjusted EBIT) was CHF1,561.6 million (US$1,669 million) in 2020 compared to an operating profit of CHF767.7 million for the same period of 2019. The company reported a net loss to equity holders of CHF2,513.7 million (US$2,686 million) compared to a net loss of CHF26.5 million in 2019. The adjusted net loss was CHF1,658.4 million (US$1,772 million) in 2020 versus a profit of CHF349.3 million last year.

Looking ahead, alongside turnover scenarios of -40% to -55% in 2021 compared to 2019, Dufry expects recurring fixed cost savings of around CHF400 million, with sustainable reduction of around CHF280 million from personnel expenses and around CHF120 million from other expenses (excluding inflation). In addition, it remains in negotiations over lease terms to achieve further savings.

Dufry said it is reopening its retail businesses gradually, following productivity scenarios location by location. At the end of February, around 1,300 shops globally were open, representing around 60% in sales capacity compared to full-year 2019. Reopened shops include locations in the US, including at Denver, Atlanta, Miami and Tampa airports. Others include the UK, Greece, Spain, Morocco, Chile, Colombia, and in Puerto Rico. At the end of March, Dufry expects to operate around 60% of shops, representing 65% of sales capacity.

In February, Dufry estimates organic growth to have reached -77.7% compared to February 2019.

Dufry said it “expects an improvement of the business in 2021, however, visibility on the shape and pace of the recovery is still limited”.

The company said it aims to focus on the protection of its liquidity while seizing organic growth opportunities, for example by accelerating expansion in Asia, through digitalisation or further channel diversification. It said it would do so with “a mid-term focus on deleveraging, opportunistic M&A if accretive and a reinitiation of dividend payments depending on the recovery trajectory”.

The company said: “Based on the efficiencies created through Dufry’s reorganisation, its cost saving targets and tight cash management, Dufry expects a return to 2019 profitability and cash generation levels even before full turnover recovery. Industry associations are estimating a full recovery of passenger numbers to a 2019 level between the end of 2022 and 2024.”

Performance by region in 2020

Europe, Middle East and Africa

Turnover in the region was CHF1,144.5 million in 2020, down by -74.2% year-on-year. Organic growth in the division reached -73.2% in the year and -81.3% in the fourth quarter.

Dufry said: “Performance improved in July and August across Europe, especially in Southern Europe with the peak of the Summer holidays and supported by the lifting of travel restrictions. From end-August onwards, some countries such as Spain, France and the UK saw increased COVID-19 cases, resulting in renewed travel limitations put in place more broadly from end of September onwards. The Mediterranean region, but also Eastern Europe, Russia, the Middle East and Africa performed above average for the region, driven by less restrictions and available travel corridors, e.g. between Russia and Turkey.”Asia Pacific

Turnover fell -76.9% year-on-year to CHF160.0 million, with organic growth for the year at -75.4% and -83.8% in the fourth quarter. Dufry noted that its footprint in the region is geared towards international travel, which is still highly impacted. The majority of the shops in Dufry’s Asia Pacific locations were closed, including Australia, Hong Kong, Indonesia, Malaysia and South Korea.
Central & South America

Turnover stood at CHF497.3 million in 2020 (-67.6%), with organic growth in the region down by -65.8% in the year and -69.5% in the fourth quarter.

Dufry said: “Central America and Caribbean, including Mexico, Dominican Republic and the Caribbean Islands, were performing more robustly compared to all other regions, driven by 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, was heavily impacted. South America saw demand pick-up in the fourth quarter amid border shop openings and increase of domestic and intra-regional travel, with re-openings in Argentina, Brazil, Peru, among others.” North America

Turnover fell by -66.7% to CHF644.4 million; organic growth came in at -65.3% in the year and -69.7% in the fourth quarter.

Dufry said: “The region, especially the US, performed above group average due to the higher exposure to domestic travel. Intra-regional travel from the US to Central America was also supportive. Our operations in Canada remained negatively impacted due to a higher exposure to international flights and ongoing restrictive measures. The performance was driven by Hudson convenience stores, food & beverage and other duty paid offerings.”