China Duty Free Group still in the grip of an economic maelstrom

READ FULL ARTICLE ON TRBusiness

By TR Business

Published May 2025

An extended period of weak consumer sentiment in China has been taking its toll across many sectors and travel retail did not escape last year. By far the biggest player in the market, China Duty Free Group (CDFG) - part of China Tourism Group Duty Free Corporation (CTG), listed on both the Hong Kong and Shanghai stock exchanges - felt the impact.

In Hong Kong, CTG's shares fell 35.5% in the 12 months to the end of March 2025, though the year-to-date decline is far less at 4.01%. Investor confidence has been knocked precisely because of China's economic situation, even though, on the face of it, the country's GDP growth looks solid.

Based on data from the National Bureau of Statistics (NBS), China's economy grew 5% in 2024, driven by a mix of stimulus measures, strong exports, and high-tech investment. This was slower than 2023's 5.2% growth, but, compared with large Western economies, this growth is stella he problem for CDI.

"CDFG faced significant challenges in 2024. Hainan duty free sales dropped by 29.9%, and average spending per customer fell by 16%." Ashley Dudarenok, founder ChoZan 超赞

The problem for CDFG is that the retail sector is suffering. In a briefing from pan-Asian professional services firm Dezan Shira & Associates, the company said: "Consumer demand remains a weak spot.

Although retail sales grew by 3.5% and online retail sales by 7.2%, these figures fall short of expectations for a robust domestic recovery. Deflationary pressure, persisting for seven consecutive quarters, further underscores the lack of consumer confidence."

The slack domestic consumption has hit CDFG in the once thriving duty free island of Hainan, and elsewhere in China. Last year, the duty free retailer saw a 16.4% year-on-year decline in revenue to CNY 56.5bn/$7.52bn while operating profit crashed by 29% to CNY6.17bn/$820m.

In a statement about its 2024 results, the board, led by Chairman Fan Yunjun said: "The company will actively seize favourable opportunities presented by vigorous national efforts to boost consumption and expand domestic demand."

Actions on several fronts include renewed efforts to boost Hainan, including a shopping experience called 'duty-free+' said to "deeply integrate culture, commerce, sports and tourism", claimed to have resulted in a near two percentage point increase in duty free market share on the island.

This is in addition to consolidating expansion at airports where duty-free "has been thriving".

Furthermore, the company is optimising downtown duty free shops having won bids in six cities (Shenzhen, Guangzhou, Xian, Fuzhou, Chengdu, and Tianjin) bringing CDFG's downtown duty free presence to 13 cities.

Finally, it has been expanding overseas with new shops at Singapore Changi and Hong Kong International airports, as well as a duty-free counter for jewellery brands in Ginza, Tokyo and a duty-free shop in Sri Lanka.

In airports, CDFG says that Beijing (including Beijing Capital and Beijing Daxing Airports) saw revenue rise by more than 115% year-on-year, while Shanghai airports (Pudong International and Shanghai Hongqiao) posted increases of nearly +32% year-on-year. The fact that airports are doing so well only underlines the scale of the spending retreat in Hainan.

That sinking feeling...

Ashley Dudarenok, Founder of China research firm ChoZan 超赞 and an expert commentator on the retail consumer market, told TRBusiness: "CDFG faced significant challenges in 2024. Hainan duty free sales dropped by 29.9%, and average spending per customer fell by 16%.

These declines were due to weak demand and reduced purchasing power, as well as inventory issues and rising competition from new duty free operators and cross-border e-commerce platforms."

Subramania Bhatt the Founder and CEO of digital market and ad agency China Trading Desk, added: "The decline in Hainan's duty free sales suggests a shift in behaviour, with more Chinese travellers opting for overseas shopping due to favourable currency exchange rates and attractive travel policies in destinations like Japan and Malaysia. This could impact domestic duty free revenues if not addressed."

CDFG's expansion to more downtown domestic duty free locations gives it a fighting chance to claw back revenue.

"These stores target high-spending international travellers and aim to extend the duty free shopping experience beyond airports and Hainan," said Bhatt.

According to Dudarenok, these new downtown units each have the potential to generate CNY2-3bn in sales.

What it will take for a bounceback?

The ChoZan founder believes that CDFG has the potential to eventually bounceback from a troubled few years.

"The company has a strong brand and a loyal customer base, and it has demonstrated its ability to generate significant sales through targeted promotional campaigns. However, it will need to be agile and innovative in responding to changing market conditions and consumer preferences."

Bhatt says CDFG's future performance will likely hinge on several factors, the most important of which is a recovery in consumer confidence.

"With the Chinese government emphasising domestic consumption and expanding duty free policies, CDFG could benefit from a gradual recovery in spending, particularly in the luxury and travel retail sectors."