Incomes of duty free operators in Sochi and Vnukovo grew despite sanctions

Permission to sell duty free goods to passengers flying from RUSSIA to the EAEU countries and savings on uniforms helped some airport stores increase revenue in 2022. But against the backdrop of the growth of Pulkovo, Sheremetyevo suffered

The revenue of the largest operator of duty-free shops (duty free), which is part of the international group Dufry, showed an increase at Vnukovo Airport in 2022 by about a third compared to the previous year. The operator's revenues also grew at Domodedovo, Pulkovo and a number of other regional airports, despite a decrease in international traffic due to sanctions against the Russian aviation industry and restrictions on flights abroad. This follows from the financial statements of Dufry's Russian subsidiaries, which are engaged in retail trade at airports. At the same time, at Sheremetyevo Airport, the operator's revenue fell over the year.

How duty free shops have changed in 2022

In March 2022, Russian duty free shops asked the government for help due to the “critical” situation in which they found themselves after the start of a special military operation in Ukraine and the sanctions imposed in response to it. Then the European Union closed the skies for Russian aircraft, and Russia in response to this introduced mirror restrictions for 36 countries, flights to other countries were also canceled due to the risk of arrest of Russian aircraft. Duty free shops are directly dependent on international air traffic and passenger traffic in the terminals, the Eurasian Duty Free Association noted earlier. Due to flight restrictions, the flow has sharply decreased, and this has dealt a blow to a market that has not yet recovered from the pandemic: due to covid-19The duty-free market in Russia has shrunk to 70% of its volume in 2019, to $400 million in 2021.

Problems also arose with the assortment: the EU countries and the usa introduced price restrictions on the supply of luxury goods to Russia. Many popular foreign brands that were sold in duty-free shops left the Russian market, including Chanel, Gucci, Hermes, Hugo Boss, Victoria's Secret, Moet, Hennessy, Cartier, Swarovski and others. Operators have had to look for replacements for these brands, as well as for dwindling brands such as Estee Lauder, L'Oreal, Lancome, Clinique, Jo Malone, Shiseido, Giorgio Armani, Keihl's. Finally, sales of duty free stores in 2022 were affected by a ban on paying for goods with plastic cards issued by foreign banks and restrictions on receiving cash from banks.

Airports have also been asked to support duty-free trade, which, due to the cessation of most flights abroad, have lost commissions from duty free shops, which accounted for a large share of income from international transportation. In June last year, Vitaly Vantsev, co-owner of Vnukovo and Azimut Airlines, said in an interview with RBC that airports had proposed introducing a duty-free trade regime in terminals from where domestic flights depart by the end of 2023. The emergence of domestic duty-free shops would allow airports to increase revenue amid falling international traffic, and passengers “to buy goods at prices lower than they exist on the market – without customs duties,” Vantsev noted. According to him, in many countries duty-free shops operate both in the area of ​​international flights (duty free), and in the zone of domestic flights (duty paid). “Passengers have already paid for the tickets, bringing taxes to the budget. The more they spend at the airport, the better it will be for the state in the end, ”explained the co-owner of Vnukovo.

In mid-June, the State Duma allowed the sale of duty free goods to those flying from Russia to the EAEU. Prior to this, Russian legislation excluded the possibility of selling duty free goods for passengers flying from Russia to allied countries - Armenia, Belarus, Kazakhstan and Kyrgyzstan, although travelers flying to Russia could buy goods in duty free shops at the airports of these countries since 2019 of the year.

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Who manages duty free shops at Russian airports

Duty free shops open in neutral territory - at airports and border crossing points, which gives sellers the opportunity to not include certain types of taxes, such as excise taxes and VAT, in their prices, and, in turn, sell goods at lower prices. The range of duty free shops primarily sell goods that are usually subject to the highest excise taxes −ALCOHOL , tobacco, and perfumes, as well as watches , jewelry, accessories, groceries, and travel products.

In March 2023, according to the register of the Federal Customs Service, there were 162 duty-free shops in Russia, of which 111 are located at airports. Compared to the beginning of 2022, the number of duty free shops decreased by 32% (there were 240), and there were 40% fewer of them at airports (there were 182). The mode of operation of the remaining stores has changed: now about 60 duty free points at airports do not work every day, says Fatima Dzoblaeva, DIRECTOR of the Eurasian Duty Free Association.

The first chain of duty-free shops in Russia opened in Sheremetyevo in 1988 - it worked under the Moscow Duty Free (Aerofirst) brand. The company was a joint venture between Aeroflot and the Irish company Aer Rianta (this company in 1947 put forward the very idea of ​​duty free). In 2013, Aer Rianta left Russia, and Aerofirst was bought out by the operator of stores under the Runway Duty Free brand - the Arial company, owned by the owner of Yashma Jewelry House Robert Martirosyan.

In 1999, another large operator, the RegStaer group, began opening duty free shops in Sheremetyevo. Now RegStaer is developing Russia's largest chain of duty-free shops, says Dzoblaeva. RegStaer is the main operator of duty free shops at Vnukovo airport, and also manages duty free points at Sheremetyevo and Domodedovo, Pulkovo in St. Petersburg, at the airports of Sochi, Krasnodar, Rostov-on-Don, and Mineralnye Vody.

In 2012, the Swiss company Dufry, the largest international travel retail operator, became the general partner and co-owner of a part of RegStaer's assets. And in 2019, Dufry announced that it would acquire 60% of RegStaer: the Swiss company paid €73.7 million (5.3 billion rubles) for this stake in the operator. In its 2022 financials, Dufry indicated that Russia occupies a small share in the group's total revenue and it is declining. So, in 2021, sales in Russia amounted to 2.2% of total Dufry sales, and in 2022 they amounted to only 1.7%.

Another major player in the Russian duty-free market is Sheremetyevo Duty Free Heinemann, which has more than 50 stores at Sheremetyevo Airport (owned by the German Gebr. Heinemann).

Shops at which airports were in the black

At the end of 2022, the revenue of the largest operator of duty free stores in Vnukovo amounted to 4.5 billion rubles. - 33% more income for the previous year (3.3 billion rubles), follows from the statements of the legal entity RegStaer related to this airport. Although revenue did not recover to the pre-Covid 2019 figure, it remained at the level of 2018 (4.4 billion rubles). Net profit in 2022 amounted to RUB 701 million. — 2.4 times more than a year earlier (289 million rubles).

At Domodedovo , Dufry's subsidiary (Dufri East LLC) saw its revenue grow by 24.7% in 2022, to RUB 2.05 billion. (a year earlier - 1.6 billion rubles). Net profit for the last year amounted to 2.4 billion rubles. against a loss of 883 million rubles. in 2021. There was no explanation in the financial statements of the companies, due to which the stores increased their revenue.

The growth of sales was not only in the stores of the capital's airports, but also in other regions. In the legal entity RegStaer at Pulkovo Airport , revenue in 2022 increased by 29.6% compared to the previous year and amounted to 2.2 billion rubles. (against 1.7 billion a year earlier), net profit amounted to 94 million rubles. (a year earlier there was a loss of 2.3 million). Positive for earningsThe company was affected by the permission to sell goods in a duty-free shop to passengers departing and arriving from the EAEU countries (with subsequent declaration and payment of customs duties and VAT), according to the explanation to the accounting statements of Regstaer-SP. The operator notes that he managed to replace the goods of brands that left Russia in the assortment, but does not specify which brands. In 2022, RegStaer at Pulkovo had to negotiate changes to the terms of lease agreements in terms of fixed payments, as well as reduce staff costs, including by optimizing staffing, reducing costs for uniforms and training. To boost sales, some items have been repriced and moved from duty-free to retail.

Stores operated by RegStaer at Sochi and Krasnodar airportsrevenue and net income also grew year-on-year, despite the closed airport in Krasnodar. In 2022, the revenue from the legal entity Nuance Basel LLC (51% owned by the Cypriot subsidiary of the Swiss Dufry, and 49% by the Aerodinamika airport holding) amounted to 1 billion rubles. Compared to the previous year, the operator's revenue increased by 27%. The net profit of Nuance Basel for 2022 amounted to 628 million rubles. - almost eight times more than in the previous year (78.8 million rubles). The increase in revenue is explained by the fact that after the closure of several airports in the south of Russia, Sochi remained the only air hub operating in the Krasnodar Territory. This led to a record increase in passenger traffic in Sochi and allowed the operator of shops at the airport to increase sales in both the duty free and duty paid segments (shops selling duty-paid goods), compensating for the forced temporary closure of Krasnodar airport stores, according to the notes to the company's financial statements. Now all passenger traffic in the south of Russia goes through the airports of Sochi and Mineralnye Vody, Dzoblaeva points out. So, according to the results of 2022, the passenger traffic at the Sochi airport amounted to 13 million people, which was a record in the entire history of the airport, the Ministry of Transport of the Krasnodar Territory reported.

What is happening with the shops in Sheremetyevo

Compared to other airports, the situation is different at duty-free shops in Sheremetyevo . Registered in Lobnya near Moscow, near Sheremetyevo, the legal entity RegStaer (Regstaer LLC, the 100% owner is the Cypriot Dufry Staer Holding Limited, the parent company is the Swiss Dufry AG) revenue in 2022 decreased relative to the level of 2021, albeit slightly - by 3.3 %, up to 223.2 million rubles. against 230.7 million rubles. a year earlier. At the end of 2022, the company was unprofitable, although compared to the previous year, the loss significantly decreased (from 106.2 million to 10.4 million rubles).

Another major operator of duty-free shops in Sheremetyevo, Imperial Duty Free, which operates under the Sheremetyevo Duty Free Heinemann brand (the company’s shareholders are Sheremetyevo Airport and the German company Gebr. Heinemann), had revenues of almost 7 billion rubles in 2022, which is 19% less year on year. The net profit of the legal entity decreased by more than 21 times: from 12.8 billion rubles. in 2021 to 586.7 million rubles. in 2022.

The fall in revenue in 2022, "Imperial Duty Free" explains the decrease in income from sales in duty free stores by 28%, is explained in the reporting. The company's results in 2022 were affected by the foreign policy situation and significant restrictions on flights - the passenger flow of international airlines decreased by 31.47% compared to the pandemic 2021 (to 2.9 million people). But on the other hand, the passenger turnover of domestic lines increased - this gave a slight increase in income from the sale of goods in duty paid shops (by 1.93%).

The drop in sales may be partly due to a reduction in the number of stores and the closure of terminals, Dzoblaeva said. According to her, if at the beginning of 2022 Imperial Duty Free had about 50 stores at Sheremetyevo Airport, then at the beginning of June 2023 only nine remained open. Due to a decrease in the volume of traffic and the intensity of flights, Sheremetyevo closed two of the five terminals in March 2022.

The main reasons for the decline in sales of duty free shops at Sheremetyevo Airport and the positive trend at other Moscow airports are the redistribution of flows, as well as initially different volumes of services for the sale of duty free goods at Moscow airports, aviation expert Grigory Pomerantsev believes. The share of international passengers traveling from Moscow or via Moscow to Sheremetyevo was an order of magnitude higher, and the infrastructure of duty free shops was more developed to meet the demand of this segment of passengers. The airport lost more international passengers last year and, as a result, more duty free customers. At the same time, stores in other Moscow airports, taking into account the relatively lower sales base and a larger volume of passengers from the CIS countries in the segment of international air transportation, could not only maintain,

RBC sent a request to Sheremetyevo Duty Free Heinemann and its shareholder Gebr. Heinemann.

Who else has lost income?

Another subsidiary of Gebr also faced a decrease in revenue. Heinemann - Travel Retail Domodedovo (50% owned by Gebr. Heinemann, the remaining 50% - by Greenway International FZCO from the UAE). It operates duty-free shops and shops in the domestic Russian departure area of ​​Moscow's Domodedovo and Zhukovsky airports. In addition, the company operates duty free and duty paid shops at the regional airports Koltsovo in Yekaterinburg, Kurumoch in Samara, Strigino in Nizhny Novgorod and Tolmachevo in Novosibirsk.

Gebr. Heinemann is the exclusive supplier of goods for these stores. In 2022, the German company supplied goods for them for a total amount of 140.3 million rubles. - five times less than in 2021 (762.9 million rubles). In 2022, the revenue of Travel Retail Domodedovo amounted to 1.8 billion rubles, 10.8% less year-on-year, net profit almost halved, follows from its financial statements: from 214 million rubles. in 2021 to 111 million rubles. in 2022. The company in the report attributed the losses to the construction of new stores in the second Domodedovo terminal. As soon as international flights begin in the same volumes, and the shops in the new terminal open, the company will be able to pay off the losses of previous years, according to the explanation to the financial statements.