Gebr. Heinemann reports solid 2019 but warns dramatic slump in travel will produce severe losses in 2020

Gebr. Heinemann closed 2019 with turnover up 5.3%, from 4.6 to 4.8 billion euros. But the COVID-19 pandemic, which caused a dramatic slump in the travel market in the beginning of March, brought about severe losses for the family business in 2020.

“During our long-standing history we have seen many crises. This gives us some points of reference. But the scale of this pandemic is unprecedented. It is clear that the road to a recovery of the travel market will be very long. We are talking about years, not months,” says Max Heinemann, Chief Executive Officer at Gebr. Heinemann and representative of the fifth generation of owners, about the current situation. “However, as a family business, we think in generations, not in quarters.”

Turnover in the retail sector in 2019 rose by 7.2% to 3.9 billion euros, in large part due to new business at Istanbul Airport, where Gebr. Heinemann launched a center management model in April 2019.

Airports was the strongest sales channel for the group, accounting for a 78% share of sales. The border shop business, the next channel, generated 12% of total sales. By category, the spirits, tobacco, confectionery and fine food product range was the strongest in 2019, accounting for 55% of group sales, followed by perfume & cosmetics (34%) and fashion & accessories (9%).

 

H1/2020: Impacts of the corona pandemic

The year 2020 will be different to all 140 previous years in the history of Gebr. Heinemann. After a promising start, the outlook for the coming months and years had to be adjusted from March 2020 onwards due to the worldwide spread and effects of COVID-19.

“In the first half of 2020, the Heinemann Group recorded a decline in turnover of almost 60% compared to the same period last year, in spite of the strong months of January and February,” says Chief Financial Officer Stephan Ernst.

 

Declines were seen in all regions and channels, in retail and distribution

Even if traveling slowly resumes, the second half of 2020 will remain far below expectations and the results of 2019. A short-term improvement of the difficult situation is therefore not to be expected, said the report.

To safeguard its business model during the re-start, Gebr. Heinemann is implementing a comprehensive package of measures to reduce costs and secure liquidity.

Operating expenses have been cut, investments have been limited to operationally necessary measures and current assets have been reduced. Gebr. Heinemann is negotiating rents and concession fees at the airports in view of the significantly reduced passenger volume.

The company also says it is discussing agreements with suppliers.

Stephan Ernst reports that the company saved slightly over 30% in the first half of the year through government subsidies and job cuts.

“However, further adjustments will have to be made to the staffing structure – both at sites worldwide and at corporate headquarters – in order to reduce personnel costs in the longer term and adapt the size of the organization to the new market conditions – to make it more lean and more effective for the re-start,” says Ernst.

Outlook: The future of Travel Retail

The Heinemann executives see the corona-related slump in the global travel market as having a considerable impact on the development of business in 2020 and estimates that years will pass before the company returns to the sales level of 2019, although it will vary by region.

The recovery in air travel and almost all other distribution channels in the travel market will certainly vary considerably from region to region.

“Even though travel will change and we will have to adapt to a different, new market, we are certain that the travel retail market will remain an important part of travel and especially of airports in the future.

“Our initial observations are positive: we are seeing in our re-opened shops that the few travelers also buy and we are even recording rising sales per passenger. We must therefore learn to adapt to the new market and the new customer needs early and quickly,” says CEO Max Heinemann.

Despite all the challenges arising from the global crisis, Max Heinemann is looking ahead: “Our medium and long-term focus is the same as before the corona crisis: we are and will remain the reliable partner in travel retail and we will do everything in our power to ensure that Gebr. Heinemann can continue to develop successfully in the fifth generation.”

Travel Markets Insider © 2020