Also on Tuesday, the Basel, Switzerland-based giant withdrew its formerly announced full-year guidance for 2020, due to low visibility.
Dufry’s quarterly results are a bellwether of how hard the travel-retail industry’s sales have been hit by the COVID-19 crisis, as travel in most parts of the world ground to a complete halt. How quickly the channel resumes operations, and people begin taking trips again, will have a major impact on the business of luxury beauty brands, which comprise travel retail’s number-one product category.
“At the beginning of 2020, we first saw an acceleration of the business and an encouraging performance,” Julián Díaz, chief executive officer of Dufry Group, said in a statement. “Then the crisis started to impact the travel-retail industry, and our performance in several locations as of February, leading to a negative performance for the first quarter of 2020.”
Dufry’s organic sales grew 0.8 percent in January; declined 2.3 percent in February, as there was a gradual slowdown, especially in Asia, and then dropped 55.9 percent in March, as travel restrictions grew and spread around the globe, causing some airport closures.
On an organic basis, Dufry’s revenues declined 21.4 percent in the first three months of 2020. In reported terms, group sales declined 23.6 percent to 1.44 billion Swiss francs, or $1.48 billion.
“We have immediately set up a special committee, [which] has developed and implemented a comprehensive action plan focused on driving sales, [securing] cash generation, [reducing] costs and [safeguarding] our profitability,” Díaz said.
“The action plan has adapted the company’s structure to the current environment and considers different scenarios of full-year sales declines ranging from 40 percent to 70 percent, and allowing us to flexibly adapt the measures to the business performance,” he continued.
The executive explained Dufry has developed a recovery plan on a per-location basis and is poised to restart operations as soon as travel restrictions are lifted.
“The recovery plan is based on each location’s productivity and includes a whole set of global initiatives to drive sales through promotions and [adapt] the assortment focusing on new products and [exclusives],” Díaz said.
He explained Dufry had in April instigated some financial initiatives to bolster its capital structure and improve liquidity.
“This is an important step, and together with our cost-cutting initiatives, it will allow us to continue operations until the next cash-generation cycle starts,” Díaz said. “Despite the currently challenging environment, we are strongly convinced that the business will recover as we have seen in previous occasions, and we are well-prepared to serve customers as soon as circumstances will allow.”