CHINA. China Tourism Group Duty Free Corporation (CTG) yesterday posted a +23.8% year-on-year rise in Q1 revenues to an all-time high of RMB20,769 billion (just under US$3 billion).
CTG, parent company of the world’s largest travel retailer by sales (according to The Moodie Davitt Report’s annual sector benchmark rankings) posted a -10.25% decrease in headline net profit to RMB2.3 billion.
“Since the beginning of 2023, the company has seized the opportunity presented by the full recovery of consumption and the liberalisation of immigration [travel] policies,” CTG said.
“We will continue to optimise the supply of products and enhance the quality of our services to unleash the potential of duty free shopping… and provide consumers with more convenient and quality duty free shopping services.”
Noting that its offline sales had showed a “significant rebound”, CTG praised the impact of the new ‘Guaranteed Pick-up’ and ‘Buy-and-Pick-up; introduced on 1 April.
“These bring more convenient and diversified choices to consumers; better meet their immediate purchasing needs and enhance their experience in duty free shopping,” the company said.
“It will also help the company to further reduce logistics costs and relieve the pressure on offshore duty free pick-up points.”
In a note, Goldman Sachs pointed to further acceleration of CDFG’s sales in Hainan as the key driver of results. The report suggested the opening of the cdf Haikou International Duty Free Shopping Complex last October had helped CDFG boost its market share on the island to 80%+ versus ~70% in Q2/Q3 last year.
Goldman Sachs also highlighted a robust recovery in gross margin – up +9 points quarter-on-quarter to 29%. Reporting on a post-results management call, the company said: “Management sounded optimistic about their business outlook and said they expect continued sales recovery across the various channels – i.e. Hainan, online, airports – and are not worrying too much about traffic/sales diversion to overseas countries.
“Compared to prior calls, they also sounded more upbeat about the performance of the Haikou International mall, noting that its sales have exceeded one-third of that at Sanya Haitang Bay (which used to contribute to ~70% of its Hainan DFS sales) and that the project has already turned profitable at its bottom line.”
In a positive read on both performance and prospects, Goldman Sachs wrote: “We maintain our view that the market is too pessimistic about the potential risk arising from traffic diversion with the border reopening. The addressable market for CTGDF is sizeable enough to support further growth across its various channels in the next 2-3 years, in our view. Meanwhile, management’s confidence in margin recovery ahead may help to relieve further downward earnings revision risk in near term.”
More to follow. ✈
