One of the world’s largest travel retailers, Gebr. Heinemann, has gone where none of its European competitors have gone in 2021: in profit. That’s quite a feat given that air travelers – who are the travel retail industry’s biggest shoppers – were scarce in airport stores last year, with 5.4 billion passengers actually checked out. compared to 2019.
As an unlisted family business, Heinemann has rarely talked about profitability in the past. This time around, in his full-year earnings call, he changed that stance slightly to say the return to profit was “a major success”, although no further details were given.
It is likely that the company has just returned to the black given the warning “excluding currency effects” but, given the reduced number of travelers, the news is welcome.
Europe’s biggest rivals, while making big moves on their 2020 losses, were still in the red. Dufry’s 2021 results showed a net loss of $375 million (CHF365 million) while Lagardère Travel Retail’s results showed its recurring EBIT negative at $84.4 million (CHF81). millions of euros).
Heinemann Group revenue in 2021 increased 31% year-on-year to $2.2 billion (€2.1 billion), still less than half (44% ) of its 4.8 billion euros in 2019 before the pandemic. For the current year, the Hamburg-based company hopes that the turnover will reach 75%.
Stick to a 75% goal
Although the figure was calculated before the start of the Russian-Ukrainian war and before the inflation rate in the European Union rose, the company stuck to its forecast. The first quarter reached 67% according to general manager Raoul Spanger. In an online conference, he added: “When we reach our target in 2022, we will be looking for solid profitability.”
at Heinemann duty-free trade at borders was one of the pillars that helped it weather the worst of the Covid crisis when airports sank. In 2020, border activity increased to 21% of activity, compared to 12% in 2019, and last year it fell back to 13%.
The return to profitability was facilitated by strict cost management, which also led to a reduction in the workforce (from just under 10,000 in 2019 to 6,700), as well as savings additional gains achieved through negotiations with airport owners and other business partners. Government support measures during the pandemic in several countries have also helped, although they are running out of steam.
Chief Financial Officer Stephan Ernst – who will leave at the end of June and hand over the reins to Kai Deneke (an internal promotion) – said in a statement: “What has gotten us through the crisis and gives us momentum for the future is This is the continued support of our shareholders and major banks, and we earn their trust through transparent communication: what we promise and what we deliver is consistent.
What will sustain the revival?
Regularly winning airport tenders is a way to drive the business forward. Successfully defending Heinemann’s position in Norway, a major airport duty free company, through its Travel Retail Norway joint venture has been a great success. The contract secures operations at Oslo, Bergen, Trondheim and Stavanger airports until 2027. “Norway has been a real stage for our business in this crisis, almost like a fast-forward button,” Spanger said. .
In addition to Norway, Heinemann opened a total of 19 new stores in 14 countries in 2021, at airports, border crossings, on cruise ships and ferries, as well as a resort destination in Macau. Sites included Bologna (Italy), Lviv (Ukraine), Malaysia and Australia, with new business also in Russia and Kazakhstan.
“Our strongest markets were Eastern Europe and Southeastern Europe, particularly airports in Kyiv, Moscow, Istanbul and Tel Aviv,” Spanger said. “We were significantly stronger there in 2021 than in Northern and Central Europe. The lower the complexity of a site, the faster it returns to growth.”
Russia’s invasion of Ukraine in late February halted or reduced some of this growth. During the online call, the company’s CEO, Max Heinemann, said, “Our business has been suspended in Ukraine for an unpredictable period, and we have decided to suspend deliveries of all products to Russia.”
Russian stores remain open
However, with its Russian joint venture partners at the Moscow airports of Sheremetyevo, Domodedovo and Zhukovsky, as well as at the regional airports of Yekaterinburg, Nizhny Novgorod and Novosibirsk and Samara, almost all of the company’s stores are still open.
Airspace bans in North America and Europe will impact these stores as international travel from Russia’s main gateways declines. In addition, the company operates Russian border stores at six crossing points with Norway, Finland, Estonia, Lithuania, China and Ukraine under a joint venture.
While Asian international travelers remain elusive — and high-spending Chinese are still absent from all non-Chinese airports — the Hamburg-based travel retail company sees a good spending trend. “We continued to miss Asian travelers in Europe in 2021, but their absence did not impact spend per passenger as significantly as we had anticipated,” Spanger said. “Fewer people are traveling, but the propensity to buy continues unabated and many travelers are spending far more money than before the crisis.”
A good example is Istanbul airport: a hub that has not suffered as much as the others. The gateway recorded good sales even though only 50% of retail spaces were open and passenger volume was about half that of 2019. “Our sales for 2021 were about 70% of pre-crisis levels,” said Aydin Celebi, Heinemann sales manager for the Middle East and Turkey. “The figures show that when travelers pass through Istanbul, they buy a lot more than before the pandemic.”
The distribution of Heinemann’s retail and distribution business also helps stabilize the ship. While revenue is retail weighted at 76% (vs. 81% in 2019), the distribution side (20%, vs. 17% in 2019) has supported the business through the troubled waters of Covid. “Our distribution customers have been and are a huge help in stabilizing our business,” Spanger noted.