ARI International Retail Operations Posts 8% Increase in Profits in 2017
April 25, 2018 – ARI’s international retail operations posted an 8% increase in profits in 2017 over those recorded for the preceding year.
This rise was underpinned by robust sales growth across the ARI international portfolio with Canada and Delhi delivering double-digit increases. ARI’s joint venture at Delhi International Airport enjoyed another year of strong sales growth with a 12% increase on 2016, whilst operations in Canada registered an 11% growth in sales. Sales in Auckland, which had its second full year of trading, increased by 5%.
Together with the strong like-for-like sales growth, retail profits were driven by an improvement in gross margins following investment under the ARI 2020 strategy to create global and regional structures which include a more centralised buying function and a global support office.
ARI’s overseas businesses, which includes ARI’s share of profits from daa’s 20% stake in Düsseldorf Airport, generated after tax profits of €24 million last year. This figure does not include the performance of ARI’s Irish operations.
In Ireland, total sales at The Loop, Dublin and Cork airports in 2017, including retail and food and beverage sales by concessionaires, increased by 7% to €323 million.
Passenger numbers increased at Dublin and Cork airports during the year and the mix of duty free to duty paid customers was favourable, however the weakness of sterling had an impact.
daa’s Annual Report does not provide separate profit figures for ARI’s operations in Ireland, which are incorporated in the overall performance of the Group.
Despite ongoing political and economic challenges, ARI’s Middle East operations, which include Bahrain, Beirut, Muscat and Cyprus, performed robustly in 2017 in terms of continued sales growth.
ARI’s business in Cyprus performed well despite pressure on passenger average spend which was driven by a decline in Russian passengers and weaker sterling. Muscat Duty Free continued to be affected by an increase in the lower spending transfer passenger segment and ongoing baggage limitations to the Indian subcontinent. In Beirut, while passenger numbers and sales grew, political instability in the region continued to challenge the business.
“I, along with our partners, am very pleased with the group’s overall performance in 2017 in both our home and overseas markets,” said ARI CEO Jack MacGowan. “Despite external challenges, we demonstrated great resilience in driving continued retail profit growth. This was underpinned by a clear focus on our strategic goals to improve profitability and expand our retail estate by winning and seamlessly implementing new contracts. I want to personally thank our partners and all our staff for their contribution and support throughout the year.”
Looking ahead, Mr MacGowan said the overall travel retail sector continues to face significant industry challenges and these are likely to intensify during 2018.
“These challenges include intense direct competition between retailers leading to rising airport concession fees. Beirut commenced trading under the retained contract in November 2017 and Muscat started trading under a new contract in the airport’s new terminal in March 2018. Both of these contracts have been materially repriced, which will add to the commercial challenges for the current year. Other industry challenges we are navigating include indirect competition from domestic and online channels, which is resulting in lower conversion of passengers to shoppers, and economic and political pressures including currency factors in certain territories. ARI is focused on investing to implement our ARI 2020 strategy, expanding our global footprint and delivering our mission of the best customer experience every time.”
Last year ARI invested across its estate delivering major refurbishments in Auckland and Bahrain, both of which are fuelling positive sales growth. ARI also successfully retained the contract to continue to operate, with its joint venture partner, the concession in Beirut and won the contract for Quebec City where it opened new outlets just before Christmas.
With its local partner in Saudi Arabia, upon completion of final contracts, ARI’s joint venture company has a seven-year contract for duty paid stores in Terminal 5 at King Khaled International Airport in Riyadh. The first of these outlets opened shortly after the year-end.
In Jakarta in Indonesia, upon completion of final contracts, ARI intends to take a stake in a new retail operation that began trading at Jakarta’s Soekarno-Hatta International Airport during the year.
ARI continued to be recognised internationally for its retail excellence, winning a number of major awards during the year. ARI North America (ARINA) won Best Canadian Airport Duty Free Company for the second year running at the 2017 Frontier Duty Free Association Gold Standards Awards.
In its home market, ARI Ireland won several awards for its partnership with Diageo for the Guinness Export House and also picked up Travel Retailer of The Year at the prestigious Icons of Whisky awards. Delhi Duty Free continued to shine, winning Best Duty Free shop at the Travel + Leisure India and South Pacific Awards and Muscat Duty Free won a Frontier Award for Best Inflight Retailer.
Passenger numbers at Dusseldorf Airport, in which ARI holds a 20% stake on behalf of daa Group, increased by almost 5% to 24.6 million last year.