Profits Keep Falling! "Tax-Free Ma" Partners with LVMH to Expand in Hong Kong and Macau

What new developments does China Duty Free Group have in its overseas strategy after its marriage with LVMH?

China Duty Free Group, known as the “Duty-Free King,” recently released its performance report for the fiscal year 2025. Under the dual pressure of slowing consumer demand and an industry downturn, the company continued its downward trend from 2024, with both revenue and net profit declining.

However, amidst the overall sluggish annual performance, clear signs of reversal emerged in the fourth quarter, with revenue and profit both turning positive, indicating a rebound in the business fundamentals.

Non-recurring factors drag down the annual performance

In 2025, China Duty Free Group’s annual performance continued to weaken.

During the reporting period, the company achieved total operating revenue of 53.694 billion yuan, a year-on-year decrease of 4.92%; net profit attributable to shareholders was 3.586 billion yuan, down 15.97% year-on-year; net profit attributable to shareholders after deducting non-recurring gains and losses was 3.544 billion yuan, a year-on-year drop of 14.48%. Basic earnings per share were 1.7332 yuan, down 15.97% year-on-year.

Regarding the decline in annual net profit, China Duty Free Group admitted that the impairment of goodwill for key subsidiaries had a certain dragging effect on net profit.

Despite the pressure on annual performance, China Duty Free Group’s quarterly performance showed significant differentiation, with the fourth quarter becoming a key turning point for the company’s operational rebound.

The financial report shows that in the fourth quarter, the company achieved operating revenue of 13.831 billion yuan, a year-on-year increase of 2.81%; the gross profit margin of its main business increased by 4.12 percentage points year-on-year; net profit attributable to shareholders was 534 million yuan, up 53.49% year-on-year. Excluding the impact of goodwill impairment losses, net profit attributable to shareholders increased by 150.63% year-on-year.

“Recently, the company has fully grasped the opportunity of the new Hainan offshore duty-free policy and the official closure of Hainan’s entire island, with its key stores in Hainan achieving record sales and customer traffic during the Spring Festival,” stated China Duty Free Group.

It is reported that since the closure of Hainan Free Trade Port on December 18, 2025, as of January 10, 2026, the number of people shopping under customs supervision at offshore duty-free shops reached 585,000, with a total amount of 3.89 billion yuan, representing year-on-year growth of 32.4% and 49.6%, respectively. This equates to an average of 24,000 people shopping duty-free in Hainan daily, with an average daily shopping total of 160 million yuan, both exceeding pre-closure levels.

With an absolute market share of about 85% in Hainan’s offshore duty-free market, China Duty Free Group has become a core beneficiary of the policy. As the policy dividends continue to be released and operational efficiency improves, the recovery momentum of the company’s core business is expected to further consolidate in 2026.

Aggressively expanding overseas mergers and acquisitions in Hong Kong and Macau

Faced with the pressure of slow growth and intense competition in the domestic duty-free market, China Duty Free Group is also accelerating its expansion into the overseas travel retail market to continuously enhance its international competitiveness.

Recently, the company completed the acquisition of DFS Group’s stores and related intangible assets in the Hong Kong and Macau regions for $294 million. At the same time, LVMH Group, the main shareholder of DFS Group, and the Miller family completed the subscription of H shares issued by China Duty Free Group.

After the transaction is completed, China Duty Free Group, through its wholly-owned subsidiary China Duty Free International, will officially receive and operate DFS Group’s high-quality travel retail stores in Hong Kong and Macau, and directly obtain exclusive rights to a series of brands and IP under DFS in China, as well as other core intangible assets.

Public information shows that DFS is a leading global high-end travel retailer, established in 1960, with stores located in major airports and core urban areas worldwide.

China Duty Free Group has explicitly stated that this acquisition marks the starting point for the company to officially embark on its overseas expansion and merger-and-acquisition year, and it will further increase its efforts in overseas expansion to enhance the proportion of overseas revenue.

Even though the overseas market and favorable policies have opened up growth possibilities, China Duty Free Group’s path to recovery still faces multiple uncertainties. Currently, the competitive landscape of the industry has yet to stabilize, and expectations for the relaxation of city-level duty-free licenses continue to suppress industry valuations. Whether future performance can transition from the fourth-quarter turning point to a comprehensive recovery still requires continuous market validation.