Speaking on an investors call after revealing Dufry’s latest measures to boost liquidity and cut costs, reported earlier, CEO Julián Díaz said the retailer was also planning for other potential scenarios, depending on the speed of recovery.
In the event of a -50% fall in sales, business could recover by mid to late 2021, and a -40% fall in sales could result in a return to 2019 levels as soon as early 2021.
Commenting on how Dufry is renegotiating Minimum Annual Guarantee-based contracts with airports, Díaz said that about 25% of its concessions were exposed to MAG.
“Most of our contracts have a variable element, where we pay a percentage of sales,” he said. “Our strategy is to pay the variable where we have no visibility about the recovery, and that is what we are offering to airports.”
He added: “Our position is that at airports where retail is closed in the country, MAGs should not be paid. We continue to look for solutions and have received positive feedback from landlords so far.”
Pressed further about the position on MAG payments, Díaz said: “Our assumption is we don’t pay MAG when the airports don’t have the required passengers. There are ongoing negotiations and we have grounds for agreement. Here, everyone wants to create a sustainable business and this is about a sustainable business for the future. The negotiations that are now open will have a positive conclusion I believe.”
On potential recovery, he said the company expects domestic market travel to rebound first, followed by regional and international. “I hope we see this begin in May or June.”
He added that Dufry’s cash burn (in a scenario without sales) is estimated at CHF70-72 million per month, but stressed (as reported earlier today) that the company had enough liquidity to get through a prolonged period without recovery in sales.
Díaz said: “We want to create opportunities for business to be adapted, a flexible company cost structure and to preserve cash as much as possible until certain about the future.”
On how Dufry is treating inventory today, Díaz said: “There are several aspects to this. We have operations still open in the US and Canada, mainly duty paid. We have some other shops open elsewhere for example in Greece and also in Asia, including duty free. We also have Internet sales in some places where we can sell, though not everywhere. And we have agreements with food & confectionery suppliers so that where items will become obsolete or expire, these are returned to suppliers.”
He added: “We will continue to collaborate with suppliers but are waiting until the situation becomes clearer to create plans with these vendors. We need certainty.”
Díaz said: “We are in a sense of urgency mode. We will stop any cost that is not related with the survival of the company.”
