Dubai Duty Free soars to record profits

Dubai Duty Free made almost Dh1.5billion (US$408.27 million) in profits this year as 57 million passengers helped lift sales to an all-time high.

Dubai Duty Free expects sales to double to about $3 billion within five years. Jeff Topping / The National

Dubai Duty Free made almost Dh1.5 billion (US$408 million) in profits this year as the 57 million passengers passing through the emirate's international airport lifted sales to an all-time high.

The airport retailer is expected to generate just less than Dh5.9bn in revenue, on sales that included some 23,000 iPads, about two tonnes of gold and more than two million bottles of perfume.

The profit disclosure reveals that Dubai Duty Free now makes more money than global big names such as Harrods, Selfridges and Debenhams and has one of the strongest profit margins in retail.

"If you look at good airports like Heathrow and Gatwick, they sell to about 18 or 19 per cent of departing passengers," said Colm McLoughlin, the executive vice chairman of Dubai Duty Free. "We sell to about half of departing passengers."

Surging passenger traffic at Dubai International Airport is encouraging companies such as Dubai Duty Free and Emirates Airline to hire thousands of new staff, driving the emirate's rebound as the economy grows at its fastest rate since 2009.

Mr McLoughlin said that the retailer had hired 1,200 staff in the past two months alone as it prepared to add 8,000 square metres of retail space with the opening of the airport's Concourse A next year. It currently covers 18,000 sq metres of retail space.

"That will ease considerable congestion that we have now in the Emirates terminal and we think it will improve our business there," he said.

Dubai Duty Free expects sales to grow to about $3bn within five years . That is not only aiding its own expansion but also providing funds for the growth of the airport itself - including to help finance a new terminal with twice the footprint of London Heathrow's Terminal 5.

"Three years down the road, Concourse Four will be built at this airport. Most of the financing for that has been done by Dubai Duty Free," Mr McLoughlin said. "We have already taken a loan for $1.7 billion, which is for that project, and we will put another 7,000 square metres of retail space in there."

He said that while there were no immediate plans for Dubai Duty Free to raise further capital for the airport's expansion, he would not rule out the possibility.

Passenger traffic at the airport grew 8 per cent to 51 million last year and is expected to rise by more than 11 per cent this year to about 57 million.

Alpen Capital estimates the Middle East now accounts for about 7 per cent of the $46bnannual duty-free and travel retail sector. The sector has continued to expand in the region despite the Arab Spring.

"Dubai Duty Free has continued to maintain good momentum in 2012 and is on course to achieve another double-digit year on year growth in revenues," said Sameena Ahmad, the managing director of Alpen Capital. "Healthy tourist inflows from the Asia Pacific countries provide impetus to the region's duty free sales. Chinese travellers, in particular, are major consumers of watches and fashion products at the Dubai Duty Free."

Last week, the retailer recorded sales of $21m in a single day when it celebrated its 29th anniversary on December 20 with a 25 per cent discount offer. Perfumes were the biggest sellers of the day, with 58,000 bottles sold amounting to Dh20.5m. Watches and clocks were in second place with Dh17.8m in sales.