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The company’s retail outlet at Changi Airport’s T2. Nuance-Watson (Singapore) sales rose by +5.2% in 2005. Tourist sales increased by +13% while passenger numbers rose by +7% |
INTERNATIONAL. The Nuance Group’s consolidated revenues (including joint ventures) for 2005 reached CHF2,066 million (US$1.7 billion at current exchange rates) compared with CHF2,083 million the year before.
Airports generated 94% of sales, with “˜others’ (wholesale, inflight, ferries) representing 4% and downtown stores 2%.
Asia Pacific was the biggest contributor to revenue with 49% of sales, followed by Europe with 43% and North America with 8%.
The company now has 325 individual retail outlets around the globe plus inflight sales onboard Edelweiss Air, European Air Express, Intersky, SATA, TAP Air Portugal, Yesair and distribution to over 20 UK-based airlines.
Sales by category were as follows:
– Fragrances & cosmetics: 37%
– “˜Luxury’ goods: 23%
– Wines & spirits: 17%
– Tobacco items: 14%
– Confectionery and food: 9%
Summing up the last year, the Nuance Group President and CEO Roberto Graziani described the travel retail market in Asia as “vibrant and strong” but Europe and Australia as “relatively depressed”. He added: “Nuance sales largely reflected these different levels of regional performance with strong growth in Asia and North America, offset by a slight decline in Europe.”
The big European shortfall occurred in Turkey, he said, where the advent of a second, rival terminal at Antalya Airport had split traffic and led to “massive sales reductions”. Passenger numbers at the terminal in which Nuance operates had fallen by close to -80% [a more equitable split has subsequently been announced and is expected to be implemented soon – Ed]. Total sales excluding the impact of Turkey had increased by +3.1%, Graziani said.
Operating profit (EBIT) fell from CHF25.9 million in 2004 to CHF19.4 million (US$16 million at today’s exchange rate). This contained significant restructuring costs and an overall contract provision for CHF15 million taken to cover future contractual losses.
Graziani added: “At the same time, operating ratios excluding the impact of concession fees improved, reflecting underlying improvements in the business.”
Graziani noted that a number of new concessions had been secured in 2005. They included:
– US: Houston and Fort Lauderdale airports
РEurope: Glasgow-Prestwick, Malta, Malm̦ and Santa Maria (Azores islands) airports
– Africa: Luanda Airport
Additionally a number of key existing contracts were extended, including Singapore Changi, all Swedish airports, Cardiff and Las Vegas. And as previously reported, long-running disputes at Melbourne Airport and with multi-airport operator TBI were amicably resolved and progressed.
Organisation improvements and Best Selling boost
Nuance said it has now split its Asia Pacific region into three separate entities to better position itself for opportunities that arise. They are Australia/New Zealand; plus the two Asian joint ventures in Singapore and Hong Kong with AS Watson.
Graziani said the company is wholeheartedly committed to “operational excellence”. “We strive to be a company with a deep and pervasive retail culture that looks at best practices in domestic retail as a benchmark,” he said.
He cited as a prime example the launch of the Best Selling project, which, as previously reported, is designed to improve point of sale performance while simultaneously reducing costs. “We are confident that this will take Nuance sales staff, and therefore our point of sale organizations, to the top of the league.”
The company has so far unveiled Best Selling in 19 airports: Antalya, Auckland, Brisbane, Bristol, Cardiff, Copenhagen, Faro, Geneva, Gothenburg, Lisbon, London, Melbourne, Perth, Porto, Stockholm, Sydney, Toronto, Vancouver and Zurich. It will also be adopted at Amsterdam, Hong Kong, Malta, Singapore and Vienna airports during 2006.
More than 10,000 days have been scheduled for Best Selling training in 2006, while incentive schemes (based on a mixture of team/store and individual performance sales) will be extended to all 2,500 Nuance shop floor employees in 2006. Some 900 vendor-supported sales consultants currently work on Nuance shop floors worldwide – they will also be part of the Best Selling project.
A new diet of Food & Beverage
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Hong Kong International Airport (HKIA) as a regional hub benefited from growth in both Hong Kong and China. Nuance-Watson (HK) sales there rose by +21% year-on-year, largely outstripping passenger traffic and HKIA retail mall growth |
Graziani emphasised the company’s determination to become a bigger food & beverage player, citing the strong success of the “˜Brek Ristorante’ concept at Singapore Changi Airport [that is now also to be rolled out at Brisbane Airport in Australia – Ed].
“We plan to complement our retail activities with our food & beverage operations, thereby opening another exciting new channel for business growth,” he said.
“Nuance will continue to work on operational improvements in 2006 with one clear objective – to be the industry benchmark of travel retail excellence,” he concluded.
Regional conditions vary significantly
Here is a brief snapshot of conditions across the various regions.
EUROPE
• Personal spending decreased in the first eight months despite generally positive market conditions
• Sales increased in the last part of 2005, including a seasonal “spending rush” at the end of the year
• Austria, Switzerland and Portgual reported excellent sales thanks to a strong customer focus and operational improvements which impacted on passenger spend rates and total sales
• A strong performance from the distribution business in the UK helped offset retail contracts losses at Belfast and Luton airports as well as a labour dispute onboard Irish Ferries
• The rival Antalya terminal opening had a profound impact on sales
NORTH AMERICA
• The significant appreciation of the Canadian Dollar (which has gained more against the US Dollar than any other currency since 2003) was a major factor in 2005. As the region generates over 80% of its volume in Canada, revenue was dampened considerably through decreased penetration – especially in connection with transborder (Canada-US) trade.
• Nevertheless visitor numbers to Canada increased, highlighted by a strong increase in international passenger traffic in Toronto
• Better space in Toronto and a “customer-focused” retail contract allowed Nuance to increase sales there over 2004
• The US saw like-for-like revenue growth, driven primarily by a weaker US Dollar
• Nuance North America introduced SAP and also the Best Selling initiative
• In 2006, Nuance said, it will further develop its partnership approach for US tenders [it has worked closely with DFASS in recent bids – Ed]. It cited the Chicago and Los Angeles duty free tenders in particular. “North of the border, Nuance plans to enhance its presence and to create and expand its offering in Toronto during the year.”
• With major trends such as lower spend per passenger and a weak Canadian Dollar expected to persist, Nuance will seek to adopt new and innovative solutions. In particular, it said, “Nuance will seek to complement its duty free retailer activities with tax paid retail, thereby opening up another channel for retail growth.”
AUSTRALIA AND NEW ZEALAND
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Summing up the last year, the Nuance Group President and CEO Roberto Graziani described the travel retail market in Asia as “vibrant and strong” but Europe and Australia as “relatively depressed” |
• Despite strong economies, retail spending was affected by a softening property market, fuel cost rises and increasing household debt. Retailers responded with significant [domestic market] discounting “which has become a feature of the market”
• A second terrorist attack in Bali and increasing low cost travel both impacted the market. Passenger growth and increased security combined to put pressure on available shopping time
• More positively, new duty free allowances helped drive awareness of arrivals shopping – and sales
• The fragrances and consumer technology categories came under mounting pressure. Rising parallel shipments into the domestic market, married to a growing discount scene as well as technology price deflation were key factors
• Increased use of the Tourist Refund Scheme on the High Street raised processing time at the airports and eroded the value proposition of airport retail
• Key categories continue to be invested in. Champagne concept areas were introduced in Australia, for example
HONG KONG
• Hong Kong International Airport (HKIA) as a regional hub benefited from growth in both Hong Kong and China. The airport attracted a +9.7% increase in passengers to 40.7 million last year
• Nuance-Watson (HK) sales rose by +21% year-on-year, largely outstripping passenger traffic and HKIA retail mall growth
• During 2006 it will open two new stores in T1 [Kiehl’s and Master of Time, both now open – Ed] and five more stores in T2
• Watson’s the Chemist was a “major success”, strengthening the duty paid segment
• To match expected growth and logistic requirements, Nuance-Watson (HK) will invest HK$12 million in a new warehousing facility, operational from mid-2006
NUANCE-WATSON (SINGAPORE)
• Economic trends exceeded expectations with unemployment falling to 3.3%
• Nuance-Watson (Singapore) sales rose by +5.2% in 2005. Tourist sales increased by +13% while passenger numbers rose by +7%.
• For the first time fragrance & cosmetics sales from the Chinese and Indian customers at Singapore Changi Airport exceeded those of Japanese customers
• Brek Ristorante, Nuance’s first food & beverage outlet, posted a very successful debut year, serving more than 500 visitors a day
• The outlook in Asia remains favourable. Economic growth of +3-5% is expected in 2006
• Driven by low cost carriers, traffic is rising but low cost travellers spend on average -33% less than full service travellers
• Cosmeceuticals are among the fastest-growing segments in cosmetics, at premium prices
MORE STORIES ON THE NUANCE GROUP
Nuance-owned Downtown Duty Free serves up a Sydney ace for customer service- 30/05/06
Nuance to extend its food & beverage reach with launch of Brek at Brisbane Airport – 25/05/06
Nuance-Watson (HK) launches first multi-brand luxury watch boutique at HKIA – 25/05/06
Impulse, gifting and uniqueness drive packaged food sales for Nuance-Watson (HK) – 22/05/06
