The consistent execution of our strategy and our focus on profitability has delivered an impressive 20% average turnover growth over the last 10 years, along with improving EBITDA margin. This combination of growth and profitability has been and will continue to be the key success factor for Dufry.

To successfully drive growth from an organic perspective, we are closely following market trends with regular field research. The most important trends in today’s world are the increasing need to provide customers with unique customer experiences and the considerable potential offered by digital applications; two areas in which we will invest going forward.

Focus on customer experience and retail excellence generates value for all stakeholder

Dufry combines the best professionals in the business to provide customers with an unprecedented shopping experience, suppliers with a unique platform to showcase their products and landlords with an in-depth retail knowhow – overall an opportunity to develop the business to the next level in terms of quality and performance. 

Excellence in retail generates value for all our stakeholders by making customers happy; by increasing the brand recognition and sales for suppliers; by creating attractive and profitable commercial environments for landlords and by ultimately growing revenues and profits for Dufry.

For our customers we work very hard every day to constantly improve our retail capabilities and to create a great shopping experience while considering their changing purchasing habits and expectations. Equally important for Dufry is to provide travelers with a singular sense of place, which translates the ambiance of the location we are operating at, and offer them to take along a “souvenir” of their trip, without forgetting the exclusive appeal an airport environment has overall. 

We serve customers from more than 100 nationalities every day.

Due to the fast passenger growth, the industry changes in demographics, customer habits and preferences are very dynamic. Thus, in travel retail understanding our customers is even more important than in other retail channels. Dufry has always set high priority on using business intelligence in order to analyze customer profiles for all retail aspects. This enables us to offer customers the right products, best serve them in the store and create the right retail concepts. We use information to refine concepts, adapt assortments and to structure passenger flows with a view to provide a memorable shopping experience to our customers.

To suppliers we offer an unrivalled world-wide window-display to promote their brands and products in 64 countries and over 380 locations in an attractive mix of mature and emerging markets as well as leading tourist destinations. Dufry works closely with its most important suppliers through the so-called brand plans, where joint teams analyze in detail the performance in each relevant location and develop action plans and measures to drive sales and customer experience.

Landlords are given access to a unique portfolio of renowned global brands. Moreover, Dufry’s capability to design location specific retail areas offering great shopping experience to travelers maximizes revenues for landlords through a variety of shop concepts – be it at airports, seaports, railway stations or border shops, in both duty-free and duty-paid environments. Our full range of retail concepts, which we continuously develop and refine, meets any consumer need(see more details on our retail concepts).

Geographic diversification to maximize opportunities and mitigate risks

We have systematically diversified our business over the last decade and today Dufry is the only true global travel retailer with operations in 64 countries. Geographic diversification is an important aspect of our strategy for a number of reasons: firstly, it is the best way to benefit from the ever growing number of travelers worldwide; secondly, as a global organization, we can efficiently develop new business opportunities; and thirdly, it is a very effective approach to mitigate risks. 

Industry specialists globally expect the number of passengers to grow in the short and long term. Both, developed and emerging markets will continue to grow in the future; the latter even at a faster pace. For emerging markets not only higher GDP growth is projected, but also the number of travelers is today smaller as compared to the overall population.

Clear market leader with unrivalled geographic footprint.

Our global footprint with operations in all continents allows us to quickly and better evaluate new projects wherever they arise, as we already have local teams almost everywhere. Having own teams on the ground gives us a clear understanding of the local market characteristics and helps to closely collaborate with landlords and other local business partners to best develop new opportunities.

Moreover, being geographically diversified considerably mitigates risks generated by external impacts in single markets or regions. This risk mitigation effect is best illustrated by the share any individual operation has on the total Group. With the largest concession accounting for about 7% of our business, and with the ten biggest ones representing less than 35% of 2016 sales, Dufry has no significant exposure to single contracts.

Seizing the opportunities of digitalization

As in many other industries, digitalization will change the way business is done in travel retail. At Dufry, we are excited about the new possibilities and opportunities that new technologies offer. Therefore digitalization is and will be a key element in our strategy going forward. For Dufry, digital technology represents a tool to support and evolve a strong business model to the next level. Ultimately, we want to create value by providing a superior customer experience and a more efficient business. Thus the use of digital and online technology will change our business in three major areas: how we communicate with our customers, how we sell products and how we organize our processes and the value chain.

Digitalization offers us new possibilities and opportunities.

In detail this means that we will firstly be increasing personalized communication with customers at home, during their whole journey, and in particular when they are in the proximity of our shops. Secondly, we will digitalize the shops to increase the conversion rate and to simplify in-store processes, such as product-consulting, payments, individual promotions etc. Thirdly, we will further improve customer services and individualize product offers for specific customer profiles. 

Ultimately, the idea is to provide customers with a unique and personalized shopping experience and to multiply the touch-points with the customer through a multi-channel interaction. For this purpose, Dufry is currently developing several digital initiatives such as the implementation of the digital signage technology as key element of the new shop concept. Furthermore, we are expanding the online reserve-and-collect service and extending the deployment of the customer loyalty program RED by Dufry.

Protecting the business model through financial discipline

In all our new projects, be it organic or acquisitions, Dufry applies a disciplined financial approach. We carefully analyze every project or significant investment with detailed projections and with a view on minimum investment returns. This implies a careful assessment of the original investment needed to build and set up the store as well as the cost structure and profitability of the business once it is operational. This culture of focusing on returns and cost control has allowed us to grow our business profitably and to capture opportunities in many different markets.

Further to the steady increase in passenger numbers over time and our financial discipline, we minimize business risks through a highly variable cost structure. This defensive characteristic helps to protect the business in case of downturns, which usually are local, thus providing a solid and resilient profile.

High free cash flow generation.

The combination of Dufry’s solid profitability and the low capital intensity results in our proven capability to generate substantial free cash flows. With the current size of the Group and the full implementation of our new business operating model, we expect to be the most efficient travel retailer and our cash flow generation capability will be second to none in the industry. Hence, we aim to deleverage quickly in the coming years and gain flexibility to drive further growth and to return value to shareholders, who have been greatly supporting Dufry in the past years.

Priority on organic growth and focus on returns

Thanks to our leading position achieved through the fast growth of the last years, Dufry is now best positioned to capture the industry’s global growth. On top of capitalizing on the strong industry’s fundamentals, we will focus on operational excellence and on developing our operating model to the next level. Additionally, we continue to add businesses by winning new concessions and potentially also by executing selective acquisitions. Given the current landscape of the market, we still see potential for small and mid-sized transactions.

While in the past acquisitions contributed the most to our growth, we expect organic growth to play a more important role going forward. Supported by the increase of passenger numbers – the most important driver of our business – we will focus on increasing sales through the implementation of attractive shop concepts and new retail techniques. Furthermore, we expect to grow through additional retail space, be it by expanding in existing locations or by winning new concessions in further airports or new businesses.

Dufry currently generates 60% of its revenues in duty-free and 40% in duty-paid operations with both sectors continuing to offer growth opportunities. Dufry traditionally features a strong project pipeline, which has allowed us to increase retail space in different channels of both sectors. On the duty-free side, while the airport channel is expected to continue to be the largest and fastest growing part of our business, we do see additional potential by further developing duty-free border shops, downtown duty-free as well as the cruise ship business in selected markets.

Passenger growth is a key driver in travel retail.

The duty-paid sector has a considerable development potential in airports as well, since the expected growth of domestic passengers is similar to the one for international travelers. Furthermore, this sector is still unexplored and even more fragmented than duty-free, thus offering attractive new expansion opportunities.

One of our main initiatives is the international roll-out of our successful duty-paid retail concepts, Hudson and Dufry Shopping, which have been implemented in selected markets and which have the potential to be deployed on a worldwide scale. Hudson is a well-established convenience store concept that has been very successful in North America in the past 25 years and which we have deployed into 13 countries so far since 2009. Dufry Shopping is a duty-paid concept that offers a high quality assortment of international brands in an exclusive setting, similar to a duty-free travel retail store, but targeted to domestic passengers. In 2014 we ran a pilot of Dufry Shopping in Brazil where we achieved strong first results. After the successful testing of the concept at Brasilia airport, in 2016 new Dufry Shopping stores were opened at the airports of Curitiba, Viracopos and Rio de Janeiro. Based on the positive results achieved so far, we are convinced that
this concept can also be successful in other markets globally.

Over the last decade, Dufry has done a number of M & A transactions and has been the industry’s most active consolidator with the goal to create value for shareholders by improving the business and creating synergies. As the travel retail market is still fairly fragmented, acquisitions will remain a growth component of Dufry’s strategy, albeit the focus will be more geared towards opportunities that are small or mid-sized businesses. We will continue to assess potential targets with a focus on Asia and the Middle East or bolt-on acquisitions that complement our presence in other existing markets.

Our strategy is supported by strong and resilient industry fundamentals

Travel retail is a fast moving and growing industry driven by a resiliently growing number of passengers. Every year global passenger numbers are expected to growth by at least 5%, which translates into a potential of over 400 million new captive customers. This intrinsic growth perspective is a unique advantage of travel retail as compared to any other location-based retail channel. Industry specialists expect this trend to continue, thus providing a resilient growth driver for travel retail going forward. The growth potential is further increased by the development of innovative commercial concepts with landlords and brands alike. Dufry’s ambition is to deliver excellence in execution while driving change in the way the travel retail industry operates. We believe that being market leader also means to be at the forefront of the development.

As many airports will further expand their commercial space and increase their capacity in order to attract airlines and passengers, the development of their commercial offering is a key success factor for them. Dufry plays an important part in this trend as we are able to provide bespoke best-in-class solutions to drive commercial revenues for our landlords.

On the supplier side, structural growth of travel retail is a very attractive feature for global brands, and they attribute an above average growth potential to this channel. Besides the pure commercial aspect of generating additional sales, travel retail provides them the opportunity to present their brand products in a unique window display across the globe. Consequently, many brands have started to create special travel retail editions and launch novelties in travel retail, adding in turn to the attractiveness of the channel.

Related Information

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Swiss heritage and travel retail

Our Business Operating Model

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Annual Report: At A Glance

Dufry Highlights 2016

Dufry Investment Case

Remuneration Report

Corporate Governance

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