USA/HONG KONG. DFS Group today announced a raft of changes to its corporate office structure that are designed to “aggressively position” the company to pursue new business opportunities in Asia – and which underline the company’s belief in the importance of the emergent Chinese market.
As a result, DFS said it is moving key functions closer to its divisions, customers, and the markets that represent its future growth. As part of this initiative, the company will establish a new Executive Office in Hong Kong in January 2004.
“As the market leader in our industry, DFS is always striving to identify opportunities that will further support the growth and profitability of our company,” said DFS Chairman and Chief Executive Officer Ed Brennan. “We believe the changes we are announcing today will create a business model that will allow us to aggressively pursue new business opportunities, build a stronger future for our employees, and sustain our position as the leader in travel retail.”
In January 2004, DFS will move its senior executive offices from San Francisco to the new Hong Kong base. Ed Brennan; Steve Mangum, executive vice-president and chief financial officer; Michael Zacharia, executive vice-president business development and general counsel; and John Wilson, senior vice-president, finance, will be based in the Hong Kong Executive Office. This office will also house the Business Planning and Analysis and Treasury functions.
DFS will continue to maintain a Group Office in San Francisco focused primarily on merchandising. Michael Schriver, president of merchandising; Kirk Martin, executive vice-president, boutiques, fashion, luxury and brand development; and Daniel Binder, senior vice-president, planning and distribution, will remain in the San Francisco Group Office as the senior leadership.
Other changes planned by DFS include the merging of its North American division into a new US Group, which also includes the company’s units in Hawaii and the mid-Pacific. This change will align all DFS divisions into two principal groups – the US and Asia – and will create more opportunities for synergy among its various divisions.
The Company also plans to relocate its distribution function from San Francisco to the US and Asia Group Offices.
Other support functions in Finance, Human Resources, Legal, and Logistics will remain in the San Francisco Group Office. These changes are expected to result in the elimination of a small number of positions in San Francisco. A severance package and transition support will be offered to displaced personnel.
DFS Group Limited is majority-owned by LVMH Moët Hennessy Louis Vuitton, the Paris-based luxury products group. A part of LVMH’s Selective Distribution Group, DFS operates more than 150 duty free and general merchandise stores throughout Asia, the Pacific Rim, and North America.
Following the announcement, Ed Brennan spoke about the decision to The Moodie Report publisher Martin Moodie.
The Moodie Report: How much does the choice of location underline DFS’ belief in the current and future importance of China and the Chinese consumer?
Ed Brennan: DFS is fortunate to be presented twice within its business life cycle the opportunity to build a relationship with an emerging consumer. Over the past 40 years we have built a strong bond with the traveling Japanese consumer. We have aged well together and developed a deep level of respect for each other. We intend to do the same with the PRC Chinese in the next 40 years.
The fact that you have expressed interest in India and have relocated to Hong Kong, suggests you see real growth potential in Asia – great news for the industry after the trials of the past two years. Are you bullish about prospects?
In the near term we see several business opportunities in Asia which cross nationalities and geographies.
This will be viewed by the markets as a real strengthening (present and future) of DFS’ position in the markets that matter. Do you see this as balance sheet enhancing and, if so, why?
We view this as a critically important strategic move for our organisation. In the short term we will be investing capital in Asia with the belief it will strengthen the company’s balance sheet in the long term. Our Galleria and airport investment in Okinawa are examples of this.
Comment: This is a major development for DFS Group, the world’s leading retailer to the Asian traveller. As Ed Brennan says, the choice of Hong Kong as the new strategic, commercial and distribution hub underlines the company’s absolute commitment to and belief in the greater China market (both inbound and outbound) and the Chinese consumer generally.
The Japanese traveller was always the heartbeat of DFS, and its command centre was, partly as a result, located in the key US Japanese gateway of San Francisco. With this relocation, the group is zeroing in on the next generation of Asian travellers, the Chinese, and wanting to be in the thick of the action – as well as getting closer to Asia in general, where markets such as India are of real interest. It is a balance sheet enhancing and wholly-sensible move. To use that time-honoured journalistic phrase, watch this space.
Note: This story was first broken to the industry via The Moodie Report.com and The Moodie Report VIP, the latter a new e-mail service that will only be used for breaking stories of major industry significance.
