European Tax Free Consumption Milan, 20 October 2016 Tax Free - - PowerPoint PPT Presentation

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

3 Source: Global Blue Data

Tax Free Spending performance

• After stellar growth supported by strong macro drivers in 2015,

relative performance is negative due to a perfect storm across all main drivers (i.e. Biometric visas, China slowdown, terror attacks, FX)

• UK delivering solid 2 digits growth supported by good mix of macro

drivers (FX), long term activities which are supporting Globe shoppers travel journey (i.e. Extend Chinese Visa Validity)

• APAC (including Japan, Korea and Singapore) is performing +4% in

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

UK (GBP) Italy France Germany 32%

• 23%
• 21%
• 8%

Jan-Sep 16 SIS dev vs PY Sep 16 SIS dev vs PY Countries 9%

• 21%
• 21%
• 11%

Europe

• 8%
• 12%

4

L12M ENDING SEPTEMBER 2016 - EUROPE

Source: Global Blue Market Estimation

Tax Free Shopping Nationalities

Top nationalities weight and performance

YTD SEP 16 - WORLDWIDE

6

• Chinese represent the first nationality both in

Europe (28% of total) and in APAC (55% of total). Their trend in Europe has been strongly affected by all negative elements previously mentioned

• Russians keep on declining for the third year in

a row and they are now the 4th nationality with 8% of total market

• Tax Free Spend of the Middle Eastern is flat in

Europe thanks to GBP favorable exchange rate They are representing nationality n.1 in UK market

Middle East: Kuwait, Qatar, Saudi Arabia, UAE Source: Global Blue Data (Jan – Sep 16)

Nationalities Overview

100%

• 12%

Total 28%

• 22%

China 12% 0% Middle East 8%

• 19%

Russian Fed 6%

• 2%

USA 3%

• 11%

Hong Kong 3%

• 14%

Thailand 3%

• 12%

Switzerland 3%

• 3%

Korea 2%

• 17%

Taiwan % on Tot

Dev vs PY

Nationalities Europe 2% 8% Japan 30%

• 6%

Others 100% 4% Total 55% 6% China 9%

• 1%

Indonesia 4%

• 10%

Taiwan 3%

• 25%

Hong Kong 3% 44% Japan 3% 6% Korea 2% Malaysia 2%

• 6%

Thailand 2% 22% Viet Nam % on Tot

Dev vs PY

Nationalities APAC 2% 6% Philippines 15% 7% Others

• 4%

APAC: Japan ,Korea, Singapore.

Key drivers of European Performances

SEP 16 - EUROPE

8 Source: Global Blue Data

Top Line Perfomance

9 % difference in SiS (Euro) vs YA

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)

The elements above led to a decrease in both volumes (n.

• f transactions) and in capacity of spending (avg spend).

Sales in Store progression Europe

• 12%
• No. of Tax

Free Forms

• 5%
• 8%
• Av. spend per

transaction

• 5%

Europe South

• 10%
• 21%

Europe North

• 20%
• 5%

France + 6%

• 1 %
• 5%

Europe Central

• 19%
• 12%
• 8%

0%

Unless mentioned differently the data refers to Like for Like geographical comparison (Excluding countries with less than 24 months – Ireland)

YTD SEP 16 - EUROPE

Highlights

10

QUARTERLY INDEX - EUROPE

Historical development by quarter of Tax Free Spending

Source: Global Blue Data

11

Euro appreciation against key globe shoppers currencies (especially CNY and USD) drove decrease in n. of transactions and average spend.

FX TRENDS

Source: Global Blue Data

USD / Euro: +23% CNY / Euro: +23% USD / Euro: -1 % CNY / Euro: -6%

YTD SEP 16 - FOCUS ON CHINESE

12

100% 172% 206% 214% 261% 249%

0% 50% 100% 150% 200% 250% 300% 2011 2012 2013 2014 2015 2016 Chinese Global shoppers Sales In Stores (Euro)

Chinese Sales in Store (Eur) (% progression vs YA)

Over the last four years, Chinese Tax Free Spending grew consistently supported by positive macro-economic drivers including GDP, new air connections and positive FX influences.

+57%

CAGR on Chinese Sales In Store over the last four years (ending in 2015). Including 2016, CAGR is back to norm +27%

Chinese globe shoppers as key driver

Source: Global Blue Data

YTD SEP 16 - FOCUS ON CHINESE

13

• 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

Slow down of Chinese demand

Soft € vs ¥ Shanghai stock market Biometric visa Terror attacks Checks at custom Source: Global Blue Data

YTD SEP 16 – CHINESE GLOBE SHOPPER

14

Official perspective of expected passengers:

2015 | 120 million outbound passengers 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

• Tour groups are growing sales bookings based on a large amount of

low cost tours focused on travellers originating in tier II & III cities

• Millennials are becoming more savvy and are looking for brands which

they can relate to from an attitude and mindset perspective

Tour Group traveller

60%

Frequent Individual Traveller (FIT)

40%

Value traveller (tier II & III) Experiential Millennials HNWI

(High Net Worth Individuals)

Source: China National Tourism Administration (CNTA)

New globe shopper profiles and expectations

15

• 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

YTD SEPTEMBER 2016- EUROPE

Categories performance

Focus on Countries

17

• YTD Tax Free Spending in Italy is decreasing 11% vs

last year

• After difficult 4 to 6 months Italy performance is back to

single digit decline

• Chinese, still representing the first nationality, are

decreasing more than rest of the market

• Outlet segment for the first time in its history presents a

negative trend (-6% vs last year) but consolidates his weight in the market (16% of total)

Source: Global Blue Data (Jan – Sep 16) Middle East: Kuwait, Qatar, Saudi Arabia, UAE

YTD SEP 16 - ITALY

Italian Market Deep Dive

100%

• 11%

Total 28%

• 23%

China 12%

• 11%

Russian Fed 9%

• 1%

USA 6% 1% Middle East 6% 1% Korea 39%

• 5%

Others % on Tot

Dev vs PY

Nationalities

Italy - 11% Sales in Store

YTD SEP 16 - FRANCE, GERMANY and UK

18

• Chinese still the first nationality despite they are suffering in France and Germany
• Chinese average spending is decreasing in most of the European Countries

Source: Global Blue Data (Jan – Sep 16) Middle East: Kuwait, Qatar, Saudi Arabia, UAE

Top 5 Globe shopper Nationality comparison

100% 9% Total 30% 16% Middle East 24% 9% China 5% 28% USA 4% 14% Hong Kong 3% 10% Thailand 34% 1% Others % on Tot

Dev vs PY

Nationalities UK +9% Sales in Store 100%

• 21%

Total 38%

• 30%

China 12%

• 7%

Middle East 9%

• 28%

Russian Fed 7%

• 9%

Switzerland 3%

• 20%

Taiwan 31%

• 10%

Others % on Tot

Dev vs PY

Nationalities

Germany - 21% Sales in Store

100%

• 21%

Total 23%

• 37%

China 10%

• 13%

USA 7%

• 17%

Middle East 6%

• 24%

Russian Fed 5%

• 9%

Hong Kong 49%

• 14%

Others % on Tot

Dev vs PY

Nationalities

France - 21% Sales in Store

Bain & Company Global Blue Analysis

Focus

20 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

Business Outlook

NEXT 12 MONTHS OUTLOOK

Tax Free outlook

Transaction drivers Average spend drivers

Air arrivals and capacity Consumer confidence Legal limitations

Europe

APAC

FX Traveller mix GDP

SiS Consensus

Slight Increase Flat Flat Slight Decrease Flat Slight Decrease Increase Flat Flat Flat Slight Decrease

+2% / +4% +1% / +3%

Slight Decrease

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