INTERNATIONAL. Travel retail-related shares continue to be hit hard amid the worst fall in the global stock market since Black Monday 1987 on Monday.

Yesterday saw more losses among most stocks in The Moodie Reportfolio*, a basket of travel retail-related stocks.

Autogrill lost -4.4% to close just above a 52-week low of 6.83 while rival Dufry fell -5.7% to 43.50, just above its low of 43.00.

Stefanel, co-parent of The Nuance Group, lost -5.4%, while slight gains were posted by Hellenic DFS (+1.6%) and Lagardère (Aelia, HDS), up +0.8%. But both were hovering just above their respective 52-week lows. Lotte Shopping Company (parent of Lotte Duty Free) also hit a 52-week low.

The travel retail industry is holding its breath amid the fall-out from one of the worst economic crises to hit the world economy in the last century.

Stock markets have borne the brunt of the economic malaise, particularly in the banking and financial services sectors. But travel stocks have been affected sharply too, due to the industry’s perceived vulnerability to the surge in oil prices earlier in the year (oil has fallen steeply in recent weeks and is currently trading around US$$89 a barrel, having hit a trading record of US$147 on 11 July), failing airlines and deteriorating consumer spending power and confidence.


Travel retail is also being affected by sharp shifts in a number of currencies considered crucial to the sector.
One is the Icelandic Krona, which has plummeted dramatically in recent days, notably against the Euro (-45% since the beginning of September) and the Pound Sterling (down -23% in a single day earlier this week).

While that spells bad news for Nordic travel retailers used to an influx of high-spending Icelanders over Christmas, it could spell a surge in inbound traffic as the price of staying in the notoriously expensive capital city of Reykjavik plummets in real terms.

The Japanese Yen, such a huge influence on the fortunes of the travel retail channel, surged on Monday by +5.7% against the Euro (its biggest ever comparative gain against the single currency) and jumped +4.2% against the US Dollar, the biggest leap since October 1998.

Some analysts believe the outlook for the Japanese economy is brighter than most other developed nations. The Yen is currently trading at 100.82 to the US Dollar – a spur for travel retail spending in destinations such as Hawaii.

The Â¥100 mark has long been considered a major psychological barrier for Japanese shoppers. If the currency gains further it will be good news for DFS and other travel retailers operating in US Dollars or dollar-linked zones – provided the Japanese are prepared to travel in the first place.

But the Korean Won has gone in the other direction. Today the currency plunged to fresh multi-year lows against both the US Dollar and the Japanese Yen – good news for Japanese shoppers in Korea, bad news for travelling nationals.

South Korea’s financial markets are in deep turmoil as a result of banks suffering from a foreign currency liquidity shortage. The Won has fallen by -24% against the US Dollar this year. The country is considered highly vulnerable to the credit crunch due to the high level of borrowing among both the business and household sectors.

*NOTE: At the beginning of August 2007 The Moodie Report invested a hypothetical US$10,000 – or local currency at prevailing exchange rates – in 12 travel retail-related stocks. Some are pure duty free/travel retail companies, some are parent or related groups. The resultant basket of stocks is The Moodie Reportfolio.

The stocks are:

– Autogrill (Aldeasa, Alpha, HMSHost, World Duty Free)
– Bahrain Duty Free Shops
– Dufry
– Dufry South America
– Hellenic DFS
– Japan Airport Terminal Co
– Jordanian Duty Free Shops
– Lagardère (Aelia; HDS Retail)
– Lotte Shopping Co
– LVMH (DFS Group)
– MISR Duty Free Shops (Egypt)
– Stefanel

Each day we monitor their individual performances on The Moodie Reportfolio Stock Watch, providing a weekly snapshot in The Moodie Report 7 (published in PDF format 44 times a year). And each month our Research & Analysis Manager, Singapore-based Justin Lee, reports on the change in The Moodie Reportfolio and its individual components. He tracks our original investment and notes the outstanding performers for the month in both local and US currency and the year to date (the latter in US Dollar terms).

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The Moodie Reportfolio basket of shares falls by -26% in September amid financial markets turmoil – 07/10/08

The Moodie Reportfolio: Autogrill shares rise on strong half-year performance – 09/09/08

The Moodie Reportfolio sinks by -29.8% amid a challenging year for travel retail stocks – 08/08/08

The Moodie Reportfolio: Travel-related stocks tumble as oil prices surge – 07/07/08