How does Hudson Ltd (NYSE:HUD), the operator of duty-free and duty-paid travel stores, keep expanding its profits once it wins an airport contract? In this segment of Motley Fool's Industry Focus, we discuss the company's recent outperformance and wrap up with insight the company's CEO recently provided to analysts on how it boosts long-term airport margin.

A full transcript follows the video.

This video was recorded on Sept. 25, 2018.

Asit Sharma: Vince, I wanted to open this up. The thing that really, really caught my eye was this new opportunity that Hudson seems to have in food and beverage services. The company is installing these open island coolers in general services shops in airports -- shops where you'd normally go in and get some chewing gum or a newspaper or that razor that you forgot to pack. It's installing these open island coolers with packaged food. It says that this is a driver of overall growth. Now, food and beverage is the largest category at 38% for this company. The next is cosmetic at about 15%. Food and beverage is where management is focusing. I was just surprised at the ingenuity of that. I don't know if you had a chance in looking through, if that also caught your eye.

Vincent Shen: I'll just say, traveling the past two weeks, at each airport that I went to, I saw the Hudson name. Beyond their Hudson-branded storefronts, probably a lot of the other brands that I saw. They've talked before about licensing with places like Dunkin' Donuts, basically the storefronts that Hudson has its fingers in.

We talked previously about 3% annual growth in air travel traffic and 4% growth in spending per passenger that they are forecasting and have seen in recent years. But Hudson's growth that you mentioned, with some of the more recent results, show us that the company is really taking market share. They're experimenting with their storefronts to maximize convenience for travelers now with these island coolers that you mentioned.

For anyone who has flown recently, I think you can appreciate the convenience that something like this offers, and some of the other things that they're doing with their storefronts. Ultimately, people want to get in and out of the airport quickly and smoothly. With how airlines are changing, the amenities and the services that they offer to passengers, less meals offered during the flight, for example, it's very easy when you're going in to grab a magazine or to grab a package of candy as a snack on the flight, you might grab a sandwich or something, as well. I think there's big reasoning behind that, in terms of this being the biggest category for Hudson. They're also seeing the success of this new addition to these newsstand stores, and the tailwind from that, where they're maximizing convenience for travelers and taking advantage of what they've dubbed that dwell time, that waiting time that people build into their itineraries in case there's long lines at the checkin counter or security gates. If you have an hour and you're sitting at the terminal, it's not unsurprising, with impulse purchases, that you end up buying something from these stores. They want to really give the passengers, their customers at these airports, essentially, as many opportunities and retail experiences that will get them to pull out their wallet and make a purchase.

I'll just add to that, more broadly, with their organic growth, how that has trended really consistently at around 9% annually. Their comps are still really strong, their profitability improves. You have to keep in mind, this isn't an upstart business. Hudson has over 1,000 stores in about 90 locations across North America. That scale and strength really puts the company in a formidable negotiating position whenever new square footage opens up, like with those opportunities that you mentioned earlier, Asit.

There are some other growing tailwinds on that front. More broadly, there's an estimated $70 billion of spending expected at 50 U.S. airports in the next few years, to bring essentially what are these aging facilities up to date, this aging infrastructure. Some of the biggest airports, like Chicago O'Hare, Los Angeles International, and New York's JFK, they're each spending $10 billion or more on their current expansions. A lot of those investments will accommodate growing air traffic. They'll also add facilities focused on retail and dining. That's right in Hudson's wheelhouse. That's just another opportunity for them to expand their footprint, their market share, within each of these major airports, these big businesses for them.

I'll turn it back to you, Asit. Any final thoughts from you, in terms of what you'll be watching as the company closes out 2018? Any other takeaways or updates you'd like to share before we move on?

Sharma: I've got one. I want to read a quote from the company's CEO, Joe DiDomizio. This is from their most recent call. It will give more insight and perspective on how the company runs its business. This is in the context of what you just described, Vince. There's this inbuilt opportunity as aging airports in the U.S. are renovated and expanded. If you are from the perspective of the person who's awarding contracts at a certain airport, you want to give your business to a proven leader with a track record, the company which is going to bring in the traffic and enhance your terminal. That's where Hudson has an edge. It's been around for 31 years.

Let me just read this, then we'll move on. I found this very insightful into the company's approach and how it looks at a terminal. The CEO said, "Unlike traditional mainstream retailers, which have more control over the timing of individual store openings and closings, our business is centered on being as responsive as possible to the ever-changing dynamics of each individual terminal and airport. In fact, we view each of our terminals as one large individual store where we populate concepts, brands, and merchandising categories to maximize growth. Our top line opportunity and our entire expense structure work across the entire terminal, similar to the way a big box retailer would manage an individual store. In this context, we are constantly managing our portfolio of stores in a particular terminal to maximize our exposure to passenger traffic and optimized penetration."

Just to give you a sense of the holistic way that Hudson, with its various concepts, looks at growing that business over time. It's really shuffling pieces, whether that be a Dunkin Donuts license or a perfume store or one of these more convenience footprints, which is offering the open island coolers and grab-and-go food. I really liked that. It gave me more insight. I'm looking for the next quarter for continued growth and more wins in terms of RFPs with other airports.

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