European Tax Free Consumption Milan, 20 October 2016
Tax Free Shopping European and APAC Markets Country trends and weights
YTD SEP 16 - EUROPE and APAC Tax Free Spending performance Jan-Sep 16 Sep 16 • After stellar growth supported by strong macro drivers in 2015, Countries SIS dev vs PY SIS dev vs PY relative performance is negative due to a perfect storm across all France -21% -23% main drivers (i.e. Biometric visas, China slowdown, terror attacks, Italy -11% FX) -8% UK (GBP) 9% 32% • UK delivering solid 2 digits growth supported by good mix of macro Germany -21% -21% drivers (FX), long term activities which are supporting Globe shoppers travel journey (i.e. Extend Chinese Visa Validity) Europe -12% -8% • APAC (including Japan, Korea and Singapore) is performing +4% in Source: Global Blue Data terms of Tax Free Spending Year-to-Date. The growth is supported by a strong increase in number of travelers across all destinations, yet arriving with lower amount of cash to spend 3
L12M ENDING SEPTEMBER 2016 - EUROPE Source: Global Blue Market Estimation 4
Tax Free Shopping Nationalities Top nationalities weight and performance
YTD SEP 16 - WORLDWIDE Nationalities Overview Europe APAC Nationalities % on Tot Dev vs PY Nationalities % on Tot Dev vs PY • Chinese represent the first nationality both in Total Total 100 % 100% 4% -12% Europe (28% of total) and in APAC (55% of China total). Their trend in Europe has been strongly China 28% -22% 55% 6% affected by all negative elements previously Indonesia Middle East 9% -1% 12% 0% mentioned Russian Fed Taiwan 4% -10% 8% -19% • Russians keep on declining for the third year in USA Hong Kong 6% -2% 3% -25% a row and they are now the 4 th nationality with 8% of total market Hong Kong Japan 3% 44% 3% -11% Korea • Tax Free Spend of the Middle Eastern is flat in Thailand 3% -14% 3% 6% Europe thanks to GBP favorable exchange rate Switzerland Malaysia -4% 3% -12% 2% They are representing nationality n.1 in UK market Thailand Korea 2% -6% 3% -3% Viet Nam Taiwan 2% 22% 2% -17% Japan Philippines 2% 6% 2% 8% Others Others 15% 7% 30% -6% Source: Global Blue Data (Jan – Sep 16) 6 Middle East: Kuwait, Qatar, Saudi Arabia, UAE APAC: Japan ,Korea, Singapore.
Key drivers of European Performances
SEP 16 - EUROPE Top Line Perfomance Source: Global Blue Data 8
YTD SEP 16 - EUROPE Highlights Sales in Store No. of Tax Av. spend per progression Free Forms transaction Europe -12% - 8% - 5% - 20% France - 1 % - 21% Europe North 0% - 5% + 6% Europe South - 10% - 5% - 5% Europe Central - 19% - 12% - 8% European performances has been quite negative this year due to a combination of many effects: • Strong base of 2015 (due to favourable exchange rates last year) • Softening of exchange rates • Biometric Visas • Safety concerns (terror attack, security issue in France) % difference in SiS (Euro) vs YA The elements above led to a decrease in both volumes (n. of transactions) and in capacity of spending (avg spend). 9 Unless mentioned differently the data refers to Like for Like geographical comparison (Excluding countries with less than 24 months – Ireland)
QUARTERLY INDEX - EUROPE Historical development by quarter of Tax Free Spending Source: Global Blue Data 10
FX TRENDS CNY / Euro: -6% CNY / Euro: +23% USD / Euro: -1 % USD / Euro: +23% Source: Global Blue Data Euro appreciation against key globe shoppers currencies (especially CNY and USD) drove decrease in n. of transactions and average spend. 11
YTD SEP 16 - FOCUS ON CHINESE Chinese globe shoppers as key driver Over the last four years, Chinese Tax Free Chinese Sales in Store (Eur) Spending grew consistently supported by positive (% progression vs YA) 300% macro-economic drivers including GDP, new air Chinese Global shoppers Sales In Stores (Euro) 261% 249% connections and positive FX influences. 250% 214% 206% 200% +57% 172% 150% CAGR on Chinese Sales In Store over the 100% 100% last four years (ending in 2015). 50% Including 2016, CAGR is back to norm +27% 0% 2011 2012 2013 2014 2015 2016 Source: Global Blue Data 12
YTD SEP 16 - FOCUS ON CHINESE Slow down of Chinese demand Soft € vs ¥ Biometric visa Terror attacks Shanghai stock market Checks at custom Source: Global Blue Data • Slow down in local economy and drop in consumer confidence • Government willingness to strengthen local consumption (positive incentive, checks at customs arrivals) • Biometric visa and terror attacks as travel restrainer to Europe 13
YTD SEP 16 – CHINESE GLOBE SHOPPER New globe shopper profiles and expectations Official perspective of expected passengers: Frequent 2015 | 120 million outbound passengers Individual Tour Group traveller Traveller (FIT) 60% 40% 2020 | 500 million outbound passengers • More and more Chinese globe shoppers feel comfortable travelling by themselves in Europe, experiencing history and entertainment. They are balancing spend preferences between luxury goods and entertainment HNWI Value • Tour groups are growing sales bookings based on a large amount of (High Net traveller Experiential Millennials low cost tours focused on travellers originating in tier II & III cities Worth (tier II & III) Individuals) • Millennials are becoming more savvy and are looking for brands which Source: China National Tourism Administration (CNTA) they can relate to from an attitude and mindset perspective 14
YTD SEPTEMBER 2016- EUROPE Categories performance • All categories are suffering due to a decrease of the average spending • Last year, Currency volatility and lag in pricing adjustment created a positive trend supporting category growth especially categories with high value transactions • Watches & Jewelry, on top of the above, is suffering to its exposure to Chinese consumers who remain concern by checks at arrivals 15
Focus on Countries
YTD SEP 16 - ITALY Italian Market Deep Dive Italy - 11% Sales in Store • YTD Tax Free Spending in Italy is decreasing 11% vs last year % on Tot Dev vs PY Nationalities Total 100% -11% • After difficult 4 to 6 months Italy performance is back to China 28% -23% single digit decline Russian Fed 12% -11% • Chinese, still representing the first nationality, are USA 9% -1% decreasing more than rest of the market Middle East 6% 1% Korea 6% 1% • Outlet segment for the first time in its history presents a Others negative trend (-6% vs last year) but consolidates his 39% -5% weight in the market (16% of total) Source: Global Blue Data (Jan – Sep 16) Middle East: Kuwait, Qatar, Saudi Arabia, UAE 17
YTD SEP 16 - FRANCE, GERMANY and UK Top 5 Globe shopper Nationality comparison France - 21% Sales in Store Germany - 21% Sales in Store UK +9% Sales in Store % on Tot Dev vs PY % on Tot Dev vs PY Nationalities % on Tot Dev vs PY Nationalities Nationalities Total Total Total 100% -21% 100% -21% 100% 9% China China Middle East 23% -37% 30% 16% 38% -30% USA Middle East China 24% 9% 10% -13% 12% -7% Middle East Russian Fed USA 7% -17% 9% -28% 5% 28% Russian Fed Switzerland Hong Kong 6% -24% 7% -9% 4% 14% Hong Kong Taiwan Thailand 5% -9% 3% -20% 3% 10% Others Others Others 49% -14% 34% 1% 31% -10% Source: Global Blue Data (Jan – Sep 16) Middle East: Kuwait, Qatar, Saudi Arabia, UAE • Chinese still the first nationality despite they are suffering in France and Germany • Chinese average spending is decreasing in most of the European Countries 18
Bain & Company Global Blue Analysis
Focus Source: Global Blue data | *Note: 2016 is October 2015-September 2016, 2015 is October 2014-September 2015, 2014 is October 2013-September 2014, 2013 is October 2012-September 2013, 2012 is October 2011-September 2012 20
Business Outlook
NEXT 12 MONTHS OUTLOOK Europe APAC Tax Free outlook Air arrivals and Slight Increase capacity Increase Transaction Consumer Flat Flat drivers confidence Flat Flat Legal limitations Slight Slight FX Decrease Decrease Average Slight Slight Traveller mix spend Decrease Decrease drivers GDP Flat Flat SiS Consensus +2% / +4% +1% / +3%
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