FAST NEWS: CTG Duty Free Profit Tumbles on Covid Store Hit

The latest: Duty-free store operator China Tourism Group (CTG) Duty Free Corp. Ltd. (1880.HK; 601888.SH) announced on Monday its revenue dropped 19.5% to 54.46 billion yuan ($8.03 billion) last year, as its net profit plunged about 48% to 502 million yuan.

Looking up: The company’s business has gradually been returning to normal following China’s decision to drop its “zero Covid” policy in December. As of its Monday announcement, more than 70 of its traditional duty-free stores had resumed operations, with sales rebounding.

Take Note: The company’s business was hit hard by a sharp drop in customers last year due to Covid-related disruptions, including store closures and disruptions to its logistics chain.

Digging Deeper: CTG Duty Free is a leader in China’s duty-free market with roughly 200 shops, and has benefited from the government’s relaxation of duty-free shopping limits on the southern vacation island of Hainan in 2020. The company was first listed in Shanghai in 2009. It raised HK$18.4 billion ($2.34 billion) through a second listing in Hong Kong last August, in the city’s biggest IPO of the year. Despite the Covid epidemic, the company’s revenue rose from 2019 to 2021 at a compound annual rate of 18.7%. But that trend reversed last year as China rolled out some of its harshest measures to date to control the Omicron variant, including citywide lockdowns during in Hainan.

Market Reaction: After opening 0.8% higher, CTG Duty Free’s Hong Kong shares dropped steadily in Tuesday morning trade and closed down 1.3% at HK$216.80 by the midday break. The stock now trades 37.2% higher than last year’s IPO price of HK$158.

Translation by Jony Ho

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