Dufry AG (DUFRY) is a Swiss-based travel retailer which operates duty-free and duty-paid shops and convenience stores in airports and other travel hubs around the world. Could this hidden gem be a good stock to invest in?
By: Allan R. Kirby
Dufry AD (DUFRY)
Dividend Rate ($0.00 per Quarter).
Yield (0.0%) *Duvfry currently does not pay a dividend.
About Dufry AG
Dufry AG (DUFRY) is the leading global travel retailer that has over 2,500 duty-free and duty-paid stores in airports, cruise lines, seaports, railway stations, and downtown tourist areas, in more than 420 locations in 65 countries across all six continents. The company was founded in 1865 and headquartered in Basel, Switzerland. Some of Dufry's stores and brands include World Duty-Free, Nuance, Dufry Sports, Hellenic Duty-Free, Colombian Emeralds, Duty-Free Uruguay, Hudson, Duty-Free Shop Argentina, and RegStaer. Additionally, Dufry offers Red By Dufry a loyalty program available in selected stores worldwide to reward loyal customers with special benefits and discounts.
What sets Dufry apart from other retailers is its unique retail locations, this is because normally customers go to its duty-free and duty-paid shops while they are waiting to board their plane or train, on a ferry, cruise liner, in a casino or hotel. Basically, Dufrys' sales are often generated by impulse decisions and/or immediate needs, which protect this travel retailer from the direct competition of online platforms such as Amazon. It also helps that Dufry has a large international footprint with its over 2,500 stores and continued expansion in new airports.
First Quarter 2021 Results
Before we highlight our opinion we need needs to review the latest quarterly results from Dufry:
In a business environment characterized by gradual improvements, Dufry has reached a turnover of CHF 460.3 million with an organic growth of -73.9% compared to 2019. The company is on track to achieve CHF 530-670 million savings compared to 2019 in personnel and other expenses for FY 2021, and has signed MAG reliefs for 2021 of around CHF 300 million. Cash consumption in Q1 2021 was better than expected reaching CHF 219.3 million and reflecting normal business seasonality, thus allowing to confirm the 2021 scenarios provided to the market.
Further Q1 Highlights:
Encouraging and ongoing re-initiation of travel and travel retail demand in regions progressing with vaccination and implementation of travel protocols, especially in the US and in Central America & Caribbean.
Around 60% of stores open, representing close to 70% of sales capacity, including successful partnership-opening of strategically important duty-free operation in Hainan.
Successful execution of CHF 1,619.9 million refinancing with well-diversified product mix, no relevant maturities before 2024, and extension of covenants holiday for another 12 months.
Strong liquidity position of CHF 2,213.7 million.
Introduction of The Americas segment, following successful Hudson re-integration and in alignment with centralized logistics platform, regional operations, and decision-making process.
JULIÁN DÍAZ, CEO of Dufry Group, commented: “We are seeing encouraging signs for resuming travel trends and shop re-openings in the regions that have most progressed with vaccination campaigns and have established cross-border travel protocols accompanied by clear procedures and necessary documentation for travelers. Customer behavior indicates continued demand for travel and travel retail, and we are well-positioned to accelerate sales with further reopenings"
Dufry's investor relations: Download Source
Basically, Dufry is seeing improvements in its sales as the world slowly opens back up and travel picks up but it will likely take more time for sales to return to pre-covid-19 levels. However, with sufficient liquidity, continued expansion, and tight expense controls the company is well-positioned for the future.
Dufry continues to expand
Dufy was not immune from the ravages of the pandemic and it was hit hard with the worldwide travel shutdown and its dividend was canceled this past year. However, the company has taken significant steps to prepare for a return of travel while also finding ways to continue its path to growth. For example in October 2020, Dufry formed a joint venture with Alibaba Group (BABA) to expand into the Chinese travel retail market, The joint venture will be 51% owned by Alibaba and 49% by Dufry. Additionally, Dufry continued to expand during a time of uncertainty for example:
Opened its first Duty Free store in Odessa, Ukraine in addition to the duty-paid shops opened at the end of 2020.
Opened Porto Alegre Megastore duty-paid (Brazil) shops which added 700 m² of retail space.
Added a new Last Minute Shop in St. Petersburg Pulkovo Airport (Russia).
Dufry's subsidiary Hudson opened six new stores at the Virgin Hotels Las Vegas, located just off the famous Las Vegas Strip.
All these examples show a steady growth of the companies retail footprint, but that's not all, In the US, Dufry started to roll out its Hudson Nonstop concept, powered by Amazon’s Just Walk Out technology, with the first store opening at Dallas Love Field Airport in Q1 2021, and the second store announced for Chicago Midway International Airport. Dufry's investor relations: Download Source
Dufry is a great opening trade that will greatly benefit with the reopening of world travel.
Is Dufry stock a buy?
Only a small number of retail businesses are highly correlated with the travel industry like Dufry, and the company is poised to profit from the return to worldwide travel. They have done a very good job cutting expenses and raising cash. The stock currently trades in the mid to low $6 and although it has significantly recovered off its lows of early 2020. But the stock is still over 40% off its pre covid highs and still has room to appreciate. However, it will likely take the balance of the year for the company to get to full operational capacity. Chief Executive Officer Julian Diaz recently said on a conference call that "We expect sales capacity of 75% open by the end of June," and he expects that to rise close to 80% by the summer. Additionally, we do not know if new travel restrictions will occur due to new variants of Covid -19, so there are some risks with this stock.
What we like about Dufry
Risks aside, what we like with Dufry is its wide moat in travel retail, its continued expansion and contract wins while still boasting a reasonably priced stock and P/E ratio. The company has done everything needed to survive the pandemic and we believe Dufry will recover along with the travel industry over the longer term. This is a unique and interesting reopening travel stock to invest in, so take the time and do your research and see for yourself if this is a stock to add to your portfolio.
Dufry's Integrated ESG Strategy:
Although Dufry is one of the largest travel retailers in the world, they have kept a focus on their social responsibility with its integrated ESG Strategy, Learn more about Dufrys' ESG strategy from their investor relations section by downloading here. We always believe it's prudent to take the time and review a companys' ESG strategy when investing in securities.
Disclosure: mysmallbank.com nor the author received any compensation from any securities highlighted in this article. The article is our opinion only and is written to help readers learn more about the stocks mentioned in this article. Consider this as basic information only and utilize professional services and additional sources before making an investment decision. #travelretail #dutyfree #dutyfreeshopping #travel #airport #taxfree #investing #stocks #dufry