Visual China.
Blue Whale financial reporter Wang Xiaonan.
The "game" between airports and duty-free shops has ushered in new progress. On December 26, China Duty Free (601888SH) disclosed the latest airport duty-free shop rent calculation method signed with Shanghai Airport and Capital Airport respectively, which can be regarded as a return to the pre-epidemic model of "there is a guarantee at the bottom and no cap at the top", retaining the "passenger flow" as the king, but the guaranteed rent and deduction rate have both decreased.
The duty-free cooperation model ushered in a "new world".
On the evening of December 26, China Duty Free announced that the company's holding subsidiaries revised the original contract and the original supplementary agreement with relevant parties of Shanghai Airport (including Shanghai Pudong and Shanghai Hongqiao International Airport) and Capital Airport, and signed relevant supplementary agreements. The aforesaid supplementary agreement mainly stipulates the latest calculation method of airport duty-free shop rent.
According to the agreement between China Duty Free and Shanghai Airport, starting from December 1, 2023, the monthly actual fee will be calculated according to the mode of the higher of the monthly guaranteed sales commission and the monthly actual sales commission. If the actual passenger flow of the month is 80% of the average passenger flow in Q3 2023, the monthly guarantee of Pudong Airport will be 5245450,000 yuan, Hongqiao Airport is 647340,000 yuan;If the actual monthly passenger flow is 80% of the average passenger flow in Q3 2023, the monthly guaranteed commission of the above two airports = 5245450,000 yuan (647..)340,000 yuan) (80% of the average monthly passenger flow in Q3 2023) Adjustment factor.
Among them, the monthly category sales commission = monthly category net sales category commission ratio, and the commission ratio of fragrance, tobacco, alcohol, department stores, and food categories is between 18% and 36%.
The agreement with Capital Airport will be implemented from January 1, 2024, and the annual operating fee will be calculated based on the mode of the higher of the annual guaranteed operating fee and the annual actual sales commission. The annual guaranteed operating fee is 55.8 billion yuan, if the actual annual passenger flow is 9.6 million, the annual guaranteed operating fee = 55.8 billion yuan (annual actual passenger flow: 9.6 million passengers) adjustment factor. Among them, the sales commission is the same as that of Shanghai Airport, which is also between 18% and 36%.
Compared with the agreements signed in 2017 and 2018, the supplementary agreements signed between China Duty Free and the two airports can be regarded as a return to the model of "there is a guarantee at the bottom and no cap at the top", but the guaranteed rent and deduction rate have dropped significantly.
At that time, the total guaranteed operating fee of the duty-free shops in the T2 and T3 terminals given by the Capital Airport was 30300 million yuan, and the proportion of sales withdrawal was .5%。Shanghai Airport gives 425% of the comprehensive sales commission, or in the agreed period of 2019-2025, China Duty Free will pay the airport a total guaranteed sales commission of 4307.1 billion yuan, whichever is higher.
It should be pointed out that this agreement continues to retain the hard truth that "passenger flow" is king while the deduction rate is significantly lower than before the epidemic and the guaranteed rent has dropped significantly. Compared with the supplementary agreement signed between China Duty Free and Shanghai Airport in 2021, the benchmark international passenger flow has changed from the average monthly actual international passenger flow in 2019 to the average monthly passenger flow in Q3 2023.
According to Guohai**, in the first three quarters, Pudong Airport and Hongqiao Airport achieved a passenger throughput of 3,873 respectively250,000 person-times yoy+28772%，3125.180,000 YOY+21038%, respectively, recovered to the same period in 201927%。Among them, the international passenger throughput of Pudong Airport is 1006130,000 passengers, recovering to 34 in the same period in 201925%。
It is worth mentioning that the high leasing costs in previous years are also a lot of expenses for China Duty Free. From 2017 to 2019, the duty-free shop rent paid by the subsidiary Sunrise Shanghai to Shanghai Airport was 255.5 billion yuan, 368.1 billion and 52100 million yuan, accounting for the proportion of the year's operating income respectively53% and 476%, and the rent of duty-free shops is increasing year by year.
In addition to the impact of the passenger flow has not yet recovered, this supplementary agreement is also related to the fact that more and more competitors are competing for a share of the "duty-free" cake, such as cross-border e-commerce with small profits and quick turnover, which has also forced China Duty Free and the airport to cut prices and make concessions.
When will the duty-free Mao "pick up?".
China Duty Free was formerly known as "China International Travel Service", which was jointly initiated and established by China International Travel Service Group in 2008 and OCT Group Corporation, listed on the Shanghai ** Stock Exchange in 2009, and landed on the Hong Kong Stock Exchange in 2022. In 2011, it began to enter the tax-free business. Since 2017, the company has gradually focused on duty-free business by successively acquiring 51% of the equity of Sunrise Duty Free (China) and Sunrise Duty Free (Shanghai) and 51% of the equity of Hainan Duty Free***. By 2020, China Duty Free was mainly engaged in the commodity sales business.
According to public information, at present, China Duty Free has set up about 200 duty-free shops covering nine types of airports, in-flights, borders, foreign ships, passenger stations, railway stations, diplomats, cruise ships and cities in more than 30 provinces, municipalities, autonomous regions, special administrative regions and Cambodia, covering more than 100 cities, and has developed into a duty-free operator with the most types of duty-free shops in the world and the largest number of retail outlets in a single country. In the first half of 2023, CDFG has six offshore duty-free shops in Hainan Province, including Haikou International Duty Free City and Sanya International Duty Free City, the world's largest and second largest duty-free commercial complexes.
It is worth mentioning that in March this year, China Duty Free invested 122.8 billion yuan to obtain 49% of the equity of ** service, becoming its second largest shareholder. Through this move, China Duty Free will obtain the license of "Duty-free Entry for Chinese Nationals in the City" through ** service, completely complete the layout of "port + outlying island + city", and at the same time capture a total of 12 duty-free shops in Shanghai and Beijing.
As the only duty-free giant in China with a full duty-free license, the number of stores in China far exceeds that of other duty-free enterprises. In its disclosed prospectus, the domestic duty-free market share of China Duty Free in 2021 was as high as 86%, much higher than that of Haifa Holdings, Hailvtou and Zhuhai Duty Free6% and 27%。
Even during the 2019-2021 period, with the support of the policy for the duty-free industry, China Duty Free has achieved rapid development and stabilized the situation of a dominant company. During this period, the operating income of China Duty Free was 4861.5 billion yuan, 5259.8 billion yuan, 6767.6 billion yuan, and the net profit attributable to the parent company was 463.2 billion yuan, 61400 million yuan, 965.4 billion yuan, the performance has reached a new high year after year.
But in 2022, China Duty Free, which has been running wildly, pressed the "pause button", and the company's revenue and profit growth both declined for the first time. In 2022, China Duty Free revenue will be 5443.3 billion yuan, down 19 percent year-on-year57%；The net profit attributable to the parent company was 50300 million yuan, a year-on-year decrease of 4787%, close to "halved". In this regard, China Duty Free explained that due to the continuous recurrence of the epidemic and the outbreak of multiple points in 2022, the company's key channel customers have plummeted, the main stores have been closed several times, and the logistics operation has been interrupted, and the company's business, especially offline business, has been severely impacted.
In 2023, tourism and travel will usher in a recovery, but the performance of China Duty Free has declined again. In the first three quarters of 2023, China Duty Free achieved revenue of 5083.7 billion yuan, a year-on-year increase of 2914%；However, its net profit fell by 178% to 542.3 billion yuan. On the eve of the disclosure of the third quarterly report of China Duty Free, Li Gang, the chairman of the company at the helm at the time, passed away due to illness, and four days later the company elected Wang Xuan as the chairman of the company's fifth board of directors. With the number of foreign tourists not yet recovering, China's new head of China Duty Free, which continues to bet on duty-free on Hainan Island, will also face multiple challenges.
Even though China Duty Free has the title of "Duty Free Brother", the strength of other competitors does not seem to be underestimated. The total number of duty-free licenses has remained at 7 for many years, and in recent years, with the relaxation of policies, the licenses in this field have been expanded to 10 enterprises with duty-free business qualifications. These include China Duty Free, Sunrise Duty Free (51% of China Duty Free Holdings), Shenzhen Duty Free Group, Zhuhai Duty Free Group, Hai Duty Free Group (51% of China Duty Free Holdings), China Service Duty Free (49% of China Duty Free Holdings), China Overseas Duty Bound (70% of China Hong Kong China Travel Service Holdings), Wangfujing, Haifa Holdings and China Overseas Travel Investment.
As the industry continues to recover, China Duty Free, once known as "duty-free Mao", in February 2020, the company's share price was less than 80 yuan shares, but in February 2021, its share price soared to the highest value of 396 since listing64 yuan shares, the total market value once reached 700 billion yuan. This year, the share price of China Duty Free fell below 100 yuan, and as of December 28, its share price was 8502 yuan shares, down more than 60% during the year, and the company's market value has evaporated by more than 500 billion yuan from its peak.