Dufry drives ahead with store investment programme after strong Q1

We have some new strategies to develop the business: one is that Dufry will create new assortments and new commercial concepts aimed at low-cost passengers.
Julián Díaz

INTERNATIONAL. Dufry Group is driving forward with a major store investment programme in 2012, with around 8,000sq m of space set to open in the year. Eurasia and North America will dominate the programme of expansion, with each of these regions adding more than 3,000sq m of retail space.

CEO Julián Díaz revealed some of the highlights in his presentation to analysts and media after yesterday’s Q1 2012 results announcement. As reported, Dufry posted its best-ever results for the period, marked by substantial turnover growth and a sharp improvement in profitability.

Díaz outlined some of the major developments that had taken place in April (after Q1 closed). These included the opening of the company’s first Hudson News Café outlets in New Delhi, as part of Dufry’s partnership with InterGlobe Retail Private Limited. The alliance is rolling out the Hudson News brand in 47 Metro locations across the city. The first unit opened on 11 April, said Díaz.

In Brazil, the company is refurbishing its stores at each of Florianopolis and Campinas airports [the latter one of the airports set to be privatised by government -Ed], where Díaz said Dufry had won earlier tenders, thus extending its concessions.

He said: “We are now signing new contracts for these airports. Once that is finalised and the new shops are ready, the shops will be open again, we believe in the next three months.”

Díaz would not be drawn on the wider implications for its contracts at Brazil’s privatised airports. He noted that the winning bidders had yet to sign their concession deals [due for 25 May -Ed] so could not comment on discussions with the new airport operators that would follow.

Also in Brazil, last month Dufry closed nine MAC outlets across its airport network. After striking an agreement with the L’Oréal Group, he said, “we will be replacing these Kiehl’s stores. These will be opened in the next two months.”

Other big developments so far this year are the opening of two new duty free shops in Mexico, with a total 700sq m of retail space, plus the first ever Hudson News outlets in Morocco.

As reported, the company has also secured contracts to expand its business at New York JFK airport; 4,000sq m of space opened in April and more is to come. Dufry has also been selected to provide retail and food services in the renovated Dallas Love Field Airport.

As Díaz has said previously, the company is winding down its operations at Singapore Changi Airport. He said he expected the last of the concessions there to close in the fourth quarter of this year.

Looking to the longer term, Díaz said that Dufry was considering how to develop retail formats to better target the low-cost passenger, as well as to adapt its existing store formats and strategy to small, high-potential emerging markets.

He said: “We have some new strategies to develop the business: one is that Dufry will create new assortments and new commercial concepts aimed at low-cost passengers as new space opens up.

“The second one is a strategy to create travel retail solutions in markets where it is complicated due to the [small] size of the business. With smaller operations we could not afford to think about the possibility [of entry] because Dufry is one of the bigger operators in the business. We will communicate more about [these plans] in the months ahead. These are strategies for five years’ time, not necessarily today.”

As at previous conference calls, Díaz was asked about the possibility of a tie-up with other major travel retailers. Yesterday one analyst asked about “speculation in the past weeks about a possible cooperation with Autogrill”.

Diaz said such “rumours are not well founded”. He noted: “There could be synergies to be achieved through such a process because we [Dufry and Autogrill] have operations in the same regions, and there could be efficiencies. But it is not just about the business and technical viewpoint, it’s whether shareholders’ interests could be aligned. And that is a question mark. In my view, and after eight years in this company, I don’t think this is going to happen in the short term.

“My expectation is that Dufry will continue to seek small to medium-sized acquisitions in emerging markets and important tourist destinations, and companies with high EBITDA margin and concession portfolios.

“I’m not saying we won’t talk about such an alliance in future, but today the focus of the company is very different.”

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