US And Canadian Airports Buoy SSP’s Food Retail Business Amid Covid-19 Shutdowns

The North American operations of travel food and beverage retailer SSP stood out across the company’s global business as the sole driver of growth over the six months to the end of March.

SSP—with a presence in 35 countries and more than 550 brands in its portfolio—says that prior to the impact of Covid-19 sales growth in North America had been robust, benefiting from positive trends in airport passenger numbers. Gains were also driven by new food retail operations in Ottawa, Seattle, Oakland and LaGuardia airports.

Revenue from North America was up 4% at constant exchange rates and now accounts for one fifth of global sales. The rise helped to offset declines in food retail operations in travel locations in the UK, Continental Europe and Rest of the World, the latter contracting by 9.3%. Overall, UK-listed SSP saw a sales decline of 2.7% to £1,237 million ($1,556 million) during the half year.

In an investor call yesterday, Group CEO Simon Smith said: “In North America, the lockdown is easing state by state and we are planning to open around 50 units in domestic airport terminals by the end of the summer.”

The cautious return is to ensure the company can reopen as prudently—and profitably—as possible. As Covid-19 began to impact operations, SSP had to take action to improve liquidity by raising around $690m through new equity, and access government loan schemes. “We also suspended our share buyback programme and deferred the final dividend,” says Smith.

Fortunately for SSP, in the U.S. around 80% of the company’s airport retail operations are domestic, and intra-American air travel is where the limited growth in passenger numbers is currently coming from. New U.S. and Canadian contracts won during the first half at Cincinnati, Providence and Edmonton airports should also eventually strengthen the business.

Commenting on the global travel retail picture, Smith notes: “Although the travel sector remains largely closed, there are a few common trends emerging: rail seems likely to start to recover first, followed by domestic air and finally international air.”

Opening strategies at airports

Aside from introducing rigorous health and safety protocols, SSP is instigating a data-driven and systematic approach to store re-openings. Key elements include: an immediate focus on reducing rents, franchise fees and minimum guarantees paid to airport landlords; prioritizing which units to open first based on customer demand, unit location, and profitability; tracking passenger traffic volumes; and re-engineering the cost base to enable profitability at lower sales levels.

Smith says: “Clearly not all of our units will open now. And for those that don’t, assets are securely hibernated, and we’ve agreed rent holidays with clients.”

Coming out of hibernation may take some months. In the current half-year ending September, SSP has previously stated that group revenue could crash by 80% to 85%. This would be a reduction in revenue of around $1.8 billion.

Prior to the Covid-19 pandemic, SSP’s food and beverage concessions, which include lounges and convenience stores, were serving around 1.5 million customers daily at approximately 180 airports and 300 rail stations worldwide. In North America brands operated at airports by SSP include Osteria by Fabio Viviani at Los Angeles International Airport, Kennie & Zuke’s Delicatessen at Portland International Airport, as well as Wahlburgers and Peet’s Coffee.