FRANCE. Lagardère Travel Retail posted recurring EBIT of €102 million for 2015, down -2.9% from 2014, parent company Lagardère revealed today in its full-year results. However the Group said that the division actually improved its profitability, outside the divested Distribution operations.
As first revealed by The Moodie Report last month, Lagardère Travel Retail recorded a 8.2% like-for-like gain in 2015 sales (-8.0% reported) once the Distribution business was stripped out.
The group spent €277 million in acquisitions at Lagardère Travel Retail (the consolidation of Paradies in November 2015 and of Airest in April 2014).
 |
Source: Lagardère |
Lagardère Travel Retail’s operating margin stood at 2.9% in 2015. Sales totalled €3,510 million, down -8.0% on a reported basis and up +4.3% like-for-like (that number includes Distribution).
The Group said that the “strategic transformation” of the division is still ongoing. Travel Retail now represents 73% of total sales for this division, up from 63% in 2014. It commented: “The development strategy of Lagardère Travel Retail was a success, with accelerated organic growth in Travel Retail and the completion of acquisitions in a growing North American market (primarily Paradies).
“The market environment in 2015 was characterised by the brisk pace of growth in air traffic, the continued downturn in the press market, and an unsettled geopolitical and macroeconomic situation. In France, the end of the year was marked by the negative effect of the attacks in Paris.
 |
Source: Lagardère |
Lagardère Travel Retail’s operating margin improved by 0.2 points to 2.9%, while recurring EBIT fell to €102 million, due to the sale of Distribution operations in Switzerland and the USA. The consolidation of Paradies (starting 1 November 2015), contributed €4 million.
The Group concluded: “The Travel Retail segment posted a good performance (+€8 million), chiefly driven by further improvement in the product mix and in purchasing conditions, the success of sales initiatives and new concepts, the strong growth of duty free in Italy, and expansion of the sales network.
“On the other hand, the consolidation of Airest had a negative impact (due to seasonal factors in Q1), of -€3 million. Excluding these scope items, the division substantially improved its profitability.”
 |
Lagardère Travel Retail sales split by region (above) and channel (below), with distribution being phased out as it becomes a ‘pure’ travel retail player |
 |
Commenting in its results presentation on the sales performance, the company noted that the +8.2% rise was driven by “passenger traffic, consolidation of acquisitions, network development and successful commercial initiatives”.
In France, there was sharp growth (+5.8%) driven by the travel essentials and food service segments as well as duty free. However, the end of the year was marked by the negative effect of the attacks in Paris.
Within duty free & luxury in France, 100% managed sales rose by +7.6%, driven by an increase of +8.3% at Paris airports, fuelled in turn by the strong improvement of fashion (+18.4%), the growth of the electronics & travel accessories network (+14.7%) and favourable trends in the core duty free segment (+5.5%).These were positively impacted by the increased spending of Chinese passengers, new commercial initiatives, favourable exchange rate impacts and a positive traffic trend (+3%).
Sales in regional airports outside Paris grew +3.8% driven by “dynamic growth” at Beauvais, Bordeaux and Lyon airports. Performance was negatively impacted by the decrease in Russian and Maghreb passengers along with some upgrade work effects in Nice.
In food service and travel essentials in France, 100% managed sales grew by +3.7%, aided by a limited decline in print sales and by a +14.3% leap in food service sales.
 |
How travel retail is becoming the driving force among the Lagardère group’s activities |
In the rest of Europe, sales were strongly up (+9.9%), especially in Poland (+17%, due to the gain
of new concessions), Italy (+7.9%) with a good performance in particular in Rome (up +12.9% despite a fire on 7 May that closed two stores in T3), Iceland (new concession), Romania (+18.7%) and Spain (+8.1%).
In the UK, growth of +8.5% was attributed to the opening of six fashion stores in Birmingham in Q3 2014
and the performance of Luton (which was renewed in Q1 2015). The UK business featured 20 stores at the end of December 2015 versus 21 stores in December 2014, after the closing of the last two travel essentials stores in July and the opening of a fashion store in Glasgow.
In the Czech Republic sales increased by +3.8% in 2015, mainly due to the continuing development of the network, leading to a increase in food service of +11.2% along with a “dynamic travel essentials performance
(+5.3%)”. Duty free showed a -2.8% decrease as sales were hit by the decline in Russian passengers.
In Romania, sales were up by +18.7%, and in Bulgaria the business grew by +15.8% thanks to the opening of seven new stores in 2014/2015 and the performance of the food & beverage and tobacco categories.
 |
How Paradies has expanded the North American network |
The robust activity in North America (+5.5%) was driven by network increase and sustained traffic.
Revenues from the overall, non-comparable network had an impact of +46.4 percentage points on total sales with the following effects:
– Paradies acquisition on 22 October 2015 (550 stores): +40.1 points;
– JFK T4 acquisition in April 2015 (14 stores opened at the end of June): +4.6 points;
– Airest integration from April 2014 (9 stores): +0.9 point;
– disposal of urban retail stores in Canada (29 stores disposed at the end of June 2014): -3.3 points;
– other network effect (mainly Dallas and LAX Food & Beverage new stores): +4.1 points
Asia Pacific was also up (+10.4%) with strong sales in the Pacific area (opening of new duty free stores in New Zealand) and in Asia (China, Singapore and Hong Kong).
In 2015 Pacific sales grew by +11.1% with the rationalisation of the news & book network being more than compensated by the growth of duty free & fashion activities, notably in Auckland.
In Asia, there was strong +9% turnover growth despite a challenging environment:
– slowdown of traffic growth in Singapore and Malaysia due to the continuous adverse effects of
political events in Thailand and the two air crashes from Malaysia Airlines;
– lower average spend growth, due to the effect of the new Chinese regulations aiming at limiting
spending and to the devaluation of the Indonesian rupiah.
Asia turnover growth was essentially driven by the ramp-up of fashion activities in China (Shenzhen, Xi’an, Kunming) and the continuous development of Singapore sales (openings of new fashion stores and new products/range development), noted the group.
 |
New concepts such as Amuse Beauty Studio in Sydney (above) and the next generation Aelia Duty Free store (below) lifted the Lagardère Travel Retail business in 2015 |
 |
