CHINA. China Tourism Group Duty Free Corporation (CTG), the parent company of China Duty Free Group (CDFG) on Friday posted a COVID-hit -47.95% decline year-on-year in 2022 net profit to CNY5.025 billion, the company revealed on Friday.
CTG’s preliminary 2022 full-year results showed that operating income fell -19.52% year-on-year to CNY54.463 billion. Realised operating profit decreased -48.63% to CNY7.605 billion.
A detailed revenue and cost breakdown will not be available until the release of final results in April.
CTG described 2022 as the year with the most serious impact on the company since the outbreak of the pandemic. It noted: “The multiple outbreaks led to a sharp drop in the company’s key channel customers; the main stores were closed several times, and logistics operations were interrupted. The company’s business, especially offline business, has been severely impacted.”
CTG continued: “In the face of unprecedented crisis and challenges, in accordance with the requirements of high-quality development, the Company strengthened the implementation of strategies, reform and innovation while strictly controlling costs and expenses.
“By conducting a series of measures, including optimising merchandise supply, increasing supply chain efficiency, enhancing marketing and promotion, and improving customer service, the Company continuously promoted its operation to improve quality and efficiency and to the largest extent minimised the impact of the pandemic on operations.”
Thanks to the country’s continuous optimisation of its COVID prevention policy since the end of 2022, CTG said it had promoted a full resumption of duty free retail operations in an orderly manner. Up to now, more than 70 duty free shops (out of 123) at traditional port locations have resumed operations, boosting the recovery of China’s duty free market, the company noted.
“Since the beginning of this year, store sales have shown obvious signs of recovery. So far, operating income has achieved substantial growth year-on-year and month-on-month,” CTG said.
In a note, Goldman Sachs Research maintained its ‘Buy’ rating (with unchanged 12-month P/E-based target prices of CNY282/HK$288), staying optimistic on CTGDF’s outlook based on three criteria:
(1) Hainan will see further acceleration in sales recovery closer to the May Labour Day holiday when more casual travellers are also likely to return;
(2) Outbound international travel recovery will bring extra duty free revenue, not necessarily cannibalising Hainan in Goldman Sachs’ view;
(3) A potential upside from liberalisation of pre-departure downtown DFS stores not priced in yet (Goldman Sachs noted that such a policy may be announced soon now that China has reopened its international border).
In a price survey, Goldman Sachs noted pricing discounts in Hainan for the major skincare and cosmetics categories had remained quite stable. This has possibly been driven by reduced competition from South Korean duty free retailers which have face sustained challenges from the shrinkage of daigou demand there in recent months.
Duty free sales to foreigners (almost all Chinese in 2022 -Ed; look out for our forthcoming feature) in South Korea have been falling by -20-30% year-on-year in recent months driven by a sharp drop in per-capita spending, the note said. ✈
Changes at the topThe long-serving Peng Hui has resigned as Chairman of China Tourism Group Duty Free Corp (China Tourism Group/CTG) and as an Executive Director from the Board of Directors due to his retirement, effective 2 February. Following Peng’s resignation, the CTG Board has elected the highly experienced and much-respected Li Gang as Chairman of the Board of Directors, Chairman of the Strategy Committee and a Member of the Nomination Committee.  Peng Hui has given outstanding service to the group over recent years  “During his tenure, Mr. Peng Hui was diligent and responsible, faithfully performed his duties, and contributed to the scientific decision-making and standardised operation of the Board of Directors,” the Board said. “The Board of Directors would like to express its heartfelt thanks to Mr. Peng Hui for his contribution to the company’s development during his tenure.” Li Gang, an Executive Director, became Chairman from the date of approval by the Board (2 February) and will serve until the expiry of the fourth session of the Board. As anticipated, the Board has also approved the election of Chen Guoqiang (Charles Chen), an Executive Director, as Vice Chairman. This was effective on 2 February until the expiry of the session.  The Executive Directors are Li Gang (Chairman), Chen Guoqiang (Vice Chairman) and Wang Xuan. As a result of these changes, the Board agreed to make the following adjustments to the members of its Strategy and Nomination Committees, effective 2 February until the end of the Board term. Strategy committee: Li Gang (Chairman), Chen Guoqiang, WANG Xuan, Zhang Rungang. Nomination committee: Zhang Rungang, Li Gang, Wang Xuan, Wang Bin and Ms Liu Yan. ✈ |
