This Retail Stock Holds Promise, but Don’t Ignore the Risks

In this section from Industry Focus, Vincent Shen and Asit Sharma discuss some of the less bullish details behind the airport retail generator Hudson Ltd. (NYSE: HUD).

From minimum payments to shareholder control, the team compared Hudson with other operators in the airport industry.


Asit Sharma: You stupidly listened to today who is a subscriber to some of our premium services and has met companies like Grupo Aeroportuario delPacífico, and I provide premium services for each revenue quarter. You may be familiar with the idea of ​​such traffic entering the airport. When you have a growing economy – the company I mentioned earlier is an airport operator in Mexico. The tourism business is booming in tourism, domestic tourism and business reasons. In North America, we are not so bad. We are growing at a rate of 3% to 4%. When you have these, and you have these fixed positions in the airport, you will benefit.

Simply put, I would like to mention some of the risks involved in the model. This must be in line with the rental spelling. Normally, when you win an airport franchise, you will encounter some so-called minimum annual deposits for the landlord. This means that it is assumed that one terminal decides to transfer its traffic to another terminal. You are stuck there. You must pay the landlord a minimum payment each year, based on an agreed formula. Large-scale tourism activities such as 9/11 unfortunately can really hit this industry, and it is also the risk that most of your business faces when you are at an airport terminal. On the other hand, Hudson is a well-known name, so in the case of competitive bidding, they want to expand. They have an advantage in the competition because the airport recognizes that the brand brings visitors.

I would like to mention a qualitative analysis again to explain why traffic has grown so much. Vince, you mentioned people planning in a timely manner. This is also called staying time, maybe shopping between destinations. Sometimes, this situation happens to me in many cases. You are trapped at the airport and you are bored to spend. After an hour or two, I was bored. I had to read something, or I needed to buy some chewing gum or a T-shirt to take home. I think this is an important part of this business model. A little-known aspect.

Vincent Shen: Of course. For us, I think this is a good turning point, in terms of some of the risks that you mentioned. In my opinion, what really matters to me in this company and this stock is the last few topics that we will discuss here. First, there are problems with Hudson’s relationship with controlling shareholder Dufrey; second, the company has a long-term roadmap for expansion.

Similarly, as you mentioned, Assett, you must remember that Duffy owns all Class B shares at $10 per share. I think it has over 90% of Hudson’s voting rights. When another entity owns a controlling interest, investors always have to keep this in mind. We hope to say this when evaluating a stock, and because this affects Hudson’s actual implementation of Dufry’s trading obligations. Business relations, the terms of certain supplier relations and things in these areas

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