INTERNATIONAL. Dufry Group Chief Executive Officer Julián Díaz today singled out Italy, Mexico, and certain Caribbean markets as its most challenging regional operations. He was speaking at the group’s 2008 results announcement this morning.
Díaz said: “The key issues in Italy were the problems with Alitalia, which began in Q1 2008. International passenger numbers at Milan Malpensa dropped heavily and we lost 52% of flights, around 1,200 in total [with the collapse of the Italian state carrier-Ed]. That of course had a clear impact on our business. Today, the situation has improved and the airport has recovered 700 flights, but there is still 22% of flights that are not there. Still, we remain optimistic. Many of the slots held by Alitalia have been released and many airlines are interested in taking them over. Over the next three, four or five months we expect the business to come back gradually.”
At Mexico City Benito Juarez International Airport, the opening of the new Terminal 2 in December 2007 hit Dufry’s business. The main duty free concession at T2 was claimed earlier that year by Panama-based Grupo Wisa.
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“In 2008 we lost 33% of passengers at Mexico City through the opening of T2,” said Díaz. “We have reorganised our operations and re-negotiated with the airport and the business will perform well again in 2009. In Mexico, our most important shop, at Cozumel’s cruise port, was destroyed by a hurricane, but that opens in October with 2,200sq m of space, so that is good news.”
Certain operations in the Caribbean also proved difficult. In Puerto Rico, US-bound flights fell by -10% in 2008 as airlines cut back on schedules, hitting the retail business hard. And in the English-speaking Caribbean, the key jewellery and watches business was hit by the effects of the economic crisis, as spending levels among travellers dropped.
Díaz said: “Even in the economically troubled Caribbean, the core category business was not affected last year, but we have seen a fall in jewellery and watches, and in electronics in particular. We plan to adapt our product mix here to supplement and support these categories.”
The retailer enjoyed organic growth in sales in each quarter of 2008, except for Q4, when turnover dropped -8.8% year-on-year. “This is the worst quarter I have seen since I entered this business,” said Díaz. “But one key point is that we have maintained a strong EBITDA margin, of 15.1% in Q4 even against the drop in turnover. And that will remain a key focus for us.”
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