From policy-driven to global expansion, China Duty Free's "second evolution" breaks through the impasse

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By Xie Changyan

Edited by Zhang Ju

In the 2026 spring travel rush and in the January–February 2026 period, duty-free consumption data from Hainan performed strongly, highlighting the momentum of the “travel + duty-free” model. However, China Tourism Group Duty Free Corporation (601888.SH) saw fluctuations in its share price during the period. The market has adjusted its expectations for industry growth rates. Institutions such as Guotai Junan Securities and Haitong International have expressed optimism about both the industry and China Tourism Group Duty Free’s future development.

In March, China Tourism Group Duty Free Group will hold events such as a Global Partners Conference, and the Hainan provincial government will also support industry growth with measures such as event-driven traffic and consumer voucher distribution. China Tourism Group Duty Free’s leading position is solid, its internationalization rollout continues to advance, and it has already acquired DFS’s Greater China business and brought in LVMH as a strategic investor. At the same time, China Tourism Group Duty Free also faces challenges such as cross-border e-commerce disruption and the cyclical nature of high-end consumption. In the future, it needs to achieve a “second evolution” to enhance its core competitiveness.

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Strong duty-free spending during island departure periods

According to statistics released recently by the Haikou Customs, during the 2026 spring travel rush period (from February 2 to March 12), Haikou Customs oversaw duty-free shopping amounting to RMB 7.49 billion, up 39.8% year over year. There were 937k shopping customers, up 30.5% year over year.

Looking back further to January–February 2026, Haikou Customs oversaw duty-free shopping of RMB 10.59 billion, with 937k duty-free shopping customers and 1.28M duty-free shopping items. These figures increased by 25.9%, 16.6%, and 9.9% year over year, respectively—again demonstrating strong momentum for the “travel + duty-free” consumption model.

Based on calculations, in February alone, duty-free shopping amounted to RMB 6.06 billion, with 719k shopping customer visits and an average spend per customer of RMB 8,428. These rose by 14.78%, 13.29%, and 1.31% year over year, respectively. The average spend per customer hit the highest level since December 2022. From February 11 to March 10, the number of shoppers who purchased “zero-tariff” imported goods under this policy was 28k customer visits, with shopping amounts of RMB 5.3731 million.

However, since the reopening after the Spring Festival holiday up to now, the share price of China Tourism Group Duty Free has fallen by nearly 20%, especially on the first trading day after the holiday when it closed at the daily limit down. This week, the stock price has remained range-bound, and on March 16, during intraday trading, China Tourism Group Duty Free’s stock gained more than 3%.

From a fundamental perspective, previously, based on assumptions of positive factors such as new policies, the market’s growth rate expectations for the 2026 industry remained at around 15%. Most sell-side institutions believe this is mainly because earlier market expectations were too high and negative factors were released with a lag, rather than indicating a trend reversal.

However, Guotai Junan Securities said that, judging from sales around and before the Spring Festival, customers’ consumption willingness has recovered, and the market has adjusted its growth-rate expectation to above 20%. But it is still difficult to reach the growth rate peak of 30%–40% seen in November 2025–January 2026.

The reason Spring Festival sales growth did not expand compared with January is mainly due to the following factors: First, in peak season, duty-free cities have an upper limit on their capacity to accommodate visitors, making further growth difficult. Second, recent reductions in duty-free discounts have led to fewer daigou buyers and lower shopping intention. Third, demand for duty-free consumption released earlier before the holiday. In addition, against the backdrop of falling share prices, the market has once again been abuzz about events in which Wangfujing and Duforui respectively obtained duty-free operating rights for Beijing T3 and Shanghai Pudong T1.

However, overall, their impact on the company is limited. From a profit perspective, the importance of the company’s Beijing and Shanghai airport channels to it has been declining year by year, and the company’s core interests are concentrated in Hainan. And from a competitive standpoint, the company has clear advantages over domestic players in supply chain and brand cooperation, while it faces limitations in operating certain categories against foreign investors.

This week, China Tourism Group Duty Free’s stock performance has been relatively steady. Guotai Junan Securities said that market concerns are expected to gradually ease, and it is optimistic about sales performance in the first quarter. In February, sales slowed down relative to market expectations and prompted a pullback. But in March, a decline-season period for island duty-free, the growth exceeded expectations. In the latter part of the month, events such as the Boao Forum for Asia will drive high-net-worth individuals to travel to Hainan, so it is optimistic that high sales growth can be sustained. In the short term, the impact of reduced discounts and currency appreciation has yet to be reflected. In the medium term, the logic of a recovery in high-end consumption and the return of Japanese tourism remains unchanged. It is confident that the long-term logic will also remain unchanged and therefore gives the stock a continued recommendation.

The leading position remains firmly secured

In addition, the 2026 China Tourism Group Duty Free Global Partners Conference will kick off on March 27 in Shanghai. Meanwhile, the China Tourism Group Duty Free Member Carnival will be officially held from March 28 to 29. This annual gala integrates industry exchanges, strategic releases, and immersive experiences. On one hand, it works with global partners to draw up a blueprint for the industry. On the other hand, it brings together wonderful moments worldwide to unlock springtime surprises, demonstrating China Tourism Group Duty Free Group’s firm commitment to deepen global cooperation and lead consumption upgrades.

Haitong International said that from March 2025 to September 2025, Hainan’s island duty-free sales continued to decline year over year, and the base was relatively low. Therefore, in the same period of 2026, Hainan’s island duty-free sales are likely to achieve a higher growth rate. The 2026 fiscal budget has been allocated according to various performances and events, and the intensity of consumer voucher distribution will remain high. Since 2024, the Hainan provincial government has tried to attract off-peak-season tourists by leveraging major performance and events. By 2025, it had gained know-how about the relevant operations and key control nodes. The government has scheduled major performance and events for the months after 2026, which is expected to have a significant promotional effect on attracting traffic in the off season.

“According to 2025 data, the marginal consumption capability of this type of customer is significantly stronger than that of ordinary off-season tourists. In 2026, the Hainan provincial government will continue to issue consumer vouchers, and the distribution intensity will remain high. The government has already determined that重点投入 (key spending) at key nodes will improve marginal effectiveness.” Haitong International further emphasized.

China Tourism Group Duty Free’s solid leading position also leads new competitors to be relatively cautious in their investment pace. Competitors such as DFS and SKP made early preparations to enter, but because they had not figured out a strategy tailored to China Tourism Group Duty Free’s real competitive strength, their investment pace has been cautious or slowed down, and they are still in a wait-and-see state regarding further market development. After experiencing the low point of the past two years, China Tourism Group Duty Free’s advantage as the leading player in island duty free is now in a trend of gradually consolidating and strengthening. New competitors have not yet prepared response plans for competing with China Tourism Group Duty Free or diverting customer traffic, causing related projects to stall.

Not only Haitong International, but also the in-depth China Tourism Group Duty Free analysis report for February 2026 released by Central Plains Securities examines—across dimensions such as international comparison, historical development, operational challenges, and future transformation—the industry standing, core advantages, and development dilemmas of China Tourism Group Duty Free. It also provides financial forecasts and highlights relevant investment risks, emphasizing that China Tourism Group Duty Free operators are entering a crucial period of second evolution—from a “policy-driven” model to a “market-driven, globalization-driven” model.

The report states that in terms of operating strategy, China Tourism Group Duty Free falls into the “rooted in the local market + initial global expansion” category. Currently, its stores mainly focus on domestic ports of entry, in-city locations, and Hainan’s island duty-free settings, which contrasts with the balanced global layout of Dufry and 乐天.

In terms of profitability, in 2023, China Tourism Group Duty Free’s operating profit margin reached 15.8%, far higher than Dufry’s 2.75% and Lagardère/LS (4.41%) and also far above 乐天 and Shilla, which are mired in losses. The core reason is that China Tourism Group Duty Free controls scarce license and channel resources and operates in a oligopoly market protected by policy. This not only helps it avoid high channel bidding costs, but also gives it more favorable franchise terms.

At the same time, relying on a single local but rapidly growing high-end consumer segment, it forms large-scale procurement for major single products, giving it extremely strong pricing power with brand partners. Also, its channel mix centered on island stores significantly reduces operating costs. Combined with policy tilting that supports the national strategy of consumer repatriation, it builds a unique profitability moat.

In 2024, China Tourism Group Duty Free’s revenue contribution from its Hainan business reached 51%, becoming the company’s core growth engine. Meanwhile, the rise of China Tourism Group Duty Free has also reshaped the global duty-free landscape. The status of traditional duty-free destinations such as South Korea and Hong Kong has declined, and China’s discourse power in the global luxury goods sector has increased significantly.

Internationalization rollout advances—opportunities and challenges coexist

Also a sell-side broker, Central Plains Securities specifically points out that from an international perspective, China Tourism Group Duty Free has already entered the first tier of the global duty-free industry. In 2023, its duty-free product sales were USD 8.01M, ranking second globally—only behind Dufry—and far ahead of giants such as Lagardère and 乐天.

And on January 20, 2026, China Tourism Group Duty Free issued an announcement stating that it would acquire DFS’s Greater China business, and a Hong Kong listed private placement would introduce LVMH, taking its internationalization rollout one step further.

The announcement also mentions that China Tourism Group Duty Free’s wholly owned subsidiary, China Tourism Group Duty Free International, would acquire, by paying cash of no more than USD 395 million, equity interests and assets related to DFS Greater China’s travel retail business. This includes 100% of the DFSCotaiLimitada shares, as well as the related assets of two stores held by DFS Hong Kong, and DFS’s Greater China intangible assets.

After closing the acquisition, China Tourism Group Duty Free will issue no more than 7.3301 million H shares and 4.6374 million H shares, respectively, at a price of HKD 77.21 per H share, to DelphineSAS (an indirectly wholly owned subsidiary of LVMH) and ShoppersHoldingsHKLimited. These will represent 0.35% and 0.22% of the company’s total share capital, respectively. The company and LVMH have signed a memorandum of understanding on strategic cooperation, intending to establish a cooperation relationship in the retail fields where the two parties’ strategies align. Specifically, the two sides will cooperate in areas such as product sales, store openings, brand promotion, cultural exchanges, travel services, and customer experience.

In response, China Yangtze Securities also said that this move aims to integrate high-quality travel retail channel networks and enhance the company’s advantageous position in the travel retail market in Hong Kong and Macau. In the short term, it will thicken profits. In the long term, it can rely on the advantages of the Hong Kong and Macau window to enrich product categories, upgrade its structure, promote high-quality domestically made products to go global, and build a platform to help local brands reach the world. After the acquired assets are consolidated into the financial statements, it will make a direct contribution to the listed company’s profit side.

“Going forward, China Tourism Group Duty Free is expected to amplify its channel advantages in the Hong Kong–Macau store business and achieve a breakthrough in scale. By selectively introducing luxury group LVMH as an investor, it will strengthen industrial synergy effects and enhance core competitiveness. Meanwhile, through multi-dimensional, all-round industrial cooperation between the two sides (such as bringing in brands including high-end labels, product procurement and sales, and brand promotion), it is expected that a strong alliance will be formed for a win-win outcome and further strengthen its leading position in the market. In addition, it will continue to make efforts in expanding markets at home and abroad, enriching product categories, improving consumer experience, and optimizing store operations, thereby achieving steady growth in revenue and performance.” China Yangtze Securities further emphasized.

Despite these achievements, China Tourism Group Duty Free also faces some challenges. For example, Central Plains Securities points out that the rise of cross-border e-commerce creates direct disruption. Its tax incentives and convenient shopping experience weaken the appeal of offline duty-free shops. High-net-worth consumers’ luxury spending is cyclical; the marginal decline of psychological satisfaction, the fact that investment demand is influenced by macro factors, and the shift of consumption toward experience-based spending all lead to unstable high-end consumption demand.

The company’s core advantages are also a double-edged sword. The monopoly licenses create a moat but also foster innovation inertia. Large-scale procurement increases pricing power but raises fixed costs. A single domestic market provides the basis for growth but also brings operational risk. The state-owned enterprise background brings policy support but lacks flexibility in decision-making and incentive mechanisms. Central Plains Securities emphasizes that the company’s core development direction in the future is to achieve a second evolution, build market-based competitiveness, advance the global expansion layout, and align—across brand combinations, store experience, and customer service—with international top-tier standards.

On March 31, China Tourism Group Duty Free will disclose its 2025 financial report. This publication will continue to follow it closely.

(This article was published in March 21 in the “Securities Market Weekly.” The individual stocks mentioned in the article are only cited as examples for analysis and do not constitute investment advice.)