Hudson Group Stock Profile
I am getting excited about summer and the air travel that will bring for my family this year! Given we are inching towards all of that fun stuff, I am going to profile Hudson Group this week. What is Hudson Group most of you are probably wondering? Hudson Group operates the airport convenience stores that dot many airports. I can see you all nodding your head as you recognize this logo and store:
I get excited when I see this logo as I associate it with getting on a plane and flying somewhere interesting. I love getting through security and spending time before the flight browsing magazines and books at a store like Hudson and purchasing some snacks for the flight. It is the only time I ever encounter a Hudson store so the association for me is positive and exciting. The Hudson stores I have been in are also the same in all airports so that since of familiarity is welcoming as you arrive or depart from an airport. My experience is that their stores are clean, organized and welcoming so I am interested to see what the future plans for this company entail.
· As stated many times on this site, I, nor ZSM Creative Inc. operating as The Capital Pink, are financial advisors and have no financial accreditations. I am applying some basic evaluation tools to this stock along with some commentary but this should only serve as a starter for your further research. The information below is only current to the day this post was written which may or may not be the same day as this post was published so please update the ratios and numbers to the current day before relying on them as they may have significantly changed (see How Do I Evaluate a Stock? (Part One) for information on where to find the ratios and numbers online). Please read my Legal Disclaimer. Also, I do not own Hudson Group stock and am not affiliated with them in any manner.
What is the Hudson Group?
Hudson Group is a wholly owned subsidiary of DufryAG which is a Swiss based travel retailer. It recently went public with an IPO on February 1, 2018 but its first stored opened in 1997. Hudson Group claims to be the most recognizable travel retailer in North America - a statement with which I would not disagree - and serves over 300,000 travellers every day. It owns and manages close to 1000 duty-paid and duty-free stores in airports and major transportation centres. The air travel industry is expected to grow at a rate of 3% and Hudson indicates customer spending is up in travel retail.
Duty paid goods (regular stores as opposed to the duty free shops) made up 76% of Hudson Group’s net sales and food and beverage make up the majority at 36% of net sales. The United States makes up 81% of net sales with Canada making up a small 19%. Finally, airports are where the majority of Hudson’s sales happen with raliways and downtown and hotel shops making up a much smaller portion. Other interesting comments regarding Hudson Group:
· Over 250 new stores have been added in the past three years;
· High profit margin given their dominant position in the market and its parent company Dufry’s global presence allows Hudson Group the ability to negotiate terms on various contracts favourably;
· 8.8% sales growth in 2017 which is impressive in the industry;
· High employee engagement and satisfaction;
· Business growth occurs through the winning of contracts at new airports and extensions in existing airports which;
· Owns a proprietary food concept called “Traveler’s Best”;
· Travel retail is somewhat different than regular retail given travellers and customers are captive in the airport;
· Chinese customers (a large growth area for Canadian tourism and thus, Canadian airports) are its highest spend demographic and focus their purchases on luxury fashion, cosmetics, skin care and luxury spirits;
· Hudson Group is active in philanthropic endeavour; and
· Recently signed an agreement with FAO Schwartz to open and operate toy and candy stores in airports.
What is Hudson’s stock doing?
Because this stock is so new, we won’t be able to do a regular analysis on it for this post. We will have to check in on it in another year. Here is all that we do know:
Stock price as at March 20, 2018: $14.99 – the price at the IPO was $19 so the price has come off somewhat from this initial offering price
Market Cap: 590.87 Mllion
So at this point we don't have much to go on in terms of analyst coverage of Hudson Group. This appears to be a well run company that operates in a niche that is not going away anytime soon. It knows what it is doing in the airport retail space and its dominant position allows it to continue to win contracts and grow in new and existing airports. It is clearly a trusted retailer that would give a landlord a great deal of confidence in terms of lease agreements. It knows what it is good at and does not appear to be moving away from that which is refreshing! Its parent company, Dufry, will continue to be a major influence on Hudson Group. All of the proceeds of the IPO went to Dufry to pay down its debt so the money won't be going to Hudson Group directly. Further, the way the share class structure was set up, Dufry will retain the vast majority of all voting rights.
We will check in on this company in a year and see how the numbers look. Until then, we will have to keep a watch on it and see how 2018 proceeds.
*** Top photo courtesy of Benjamin Voros on Unsplash