Brexit: Weak Pound forces Dubai Duty Free to cut prices

Dubai Duty Free shops at Concourse A_ Sept 2013

Dubai Duty Free cut prices after a weaker pound led to lower airport sales and expects to boost revenue by 5 percent this year, driven by spending by Chinese travelers, say Bloomberg.

“We have been negotiating with our suppliers, a lot of whom we pay in dollars,” the airport retailer’s Chief Executive Officer Colm McLoughlin said in an interview on Sunday. “They cooperated very well with us and we’ve been able to correct this business of being perceived as expensive.”

The government-controlled company, which operates at Dubai International Airport — the word’s busiest by international traffic, posted a 3 percent drop in sales to $1.85 billion in 2016. The decline was partly due to the pound’s slump versus the dollar in the second half of the year after Britain voted to leave the European Union in June, the CEO said.

“The big effect of Brexit from our point of view is the exchange rate,” McLoughlin said. “If it makes travel more expensive for people, it’s serious.” European travelers make up almost a quarter of Dubai Duty Free’s business, he said.

The retailer expects sales this year to be driven by Chinese travelers buying tobacco, alcohol and skin-care products, McLoughlin said. Chinese passengers account for about 9 percent of total spending, while they only represent 3.9 percent of traffic, he said. Spending by passengers from Africa is also on the rise.

Last year, perfumes were the biggest-selling product for Dubai Duty Free with $307 million in sales, followed by alcohol with $295 million and cigarettes with $161 million, the company said earlier this month.

The dirham, the currency of the United Arab Emirates where Dubai Duty Free is based, is pegged to the dollar.