With major U.S. and Canadian airports close to being tapped out, the company must look to non-traditional venues for its stores, and it's already experimenting with new partners.
A full transcript follows the video.12
This video was recorded on March 20, 2018.
Vincent Shen: Last but not least, I also wanted to look at the broader outlook for Hudson. For the company to grow, you mentioned some of the high-level tailwinds that it has in terms of passenger traffic, people spending at airports. I think there is also the more straightforward option here where Hudson is able to lock down more concession agreements, grow the number of stores it has, for example, in existing locations.
But looking beyond that, the company is also starting to expand outside of airports more and more. It already has a presence in most of the major airports, so the company is ultimately going to have to seek out other places where it can operate stores. For example, you can find Hudson in a few tourist attractions like the Houston Space Center, the Empire State Building. But a more recent development, in June of last year, Hudson opened the stores at the Hard Rock Hotel and Casino in Las Vegas. I think non-traditional venues like that will be very important to Hudson's long-term growth.
Usually, we can point to international markets as another major opportunity, but I think, again, due to the company's relationship with Dufry and its own operations abroad, I think that's less likely to be something that Hudson can gain a lot of exposure to. But on the other hand, Dufry and Hudson are no stranger to acquisitions. Hudson itself was a 2008 buyout. Then, it was followed by Nuance in 2014 and World Duty Free Group in 2015. The North American operations for those two acquisitions were rolled into the Hudson enterprise. Keep in mind that there are other smaller and regional concession operators that can be rolled into Hudson's portfolio.
We have about a minute here, Asit. Any final thoughts or takeaways on your end?
Asit Sharma: I think this is an interesting company to start following for all the reasons we've mentioned: the long-term growth potential, the fact that it has a build between organic growth and new store expansion to increase its value over the long term. I do like that the company is trying to maximize every last bit of square foot in its airport stores. It's experimenting with different store formats, as you mentioned, Vince. And they're trying to optimize that food and beverage category, which carries a high margin.
The flip side, which we talked about, the control by Dufry, is something to keep in mind if you're going to buy the stock. But wait a few quarters this year, and let's see how the company operates as a public company and get more of a specific growth plan from management as the year winds on. This is not a stock I'd plunge into, but definitely put this on your watch screen. It's intriguing.
Shen: Yeah, I completely agree. I think when it comes to brick and mortar, a lot of the thriving retailers that we've talked about either have some sort of brand strength, large scale, or special niche that they can tap. If you think about dollar store chains, discount retailers, the luxury brands, I think Hudson definitely falls into this group as well, and the same-store sales and earnings growth speak to that strength.