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December global update: Tax Free Shopping slows to +11%

As we round off the year, Tax Free Shopping (TFS) year-on-year (YoY) sales growth has slowed again, with December data showing +11% after November’s rallying +24% gain.

Following the earlier Q2 and Q3 highs of +51% and +41% respectively, TFS sales performance this year has seen peaks and troughs in line with currency exchange rate fluctuations and global markets turmoil.

Despite the lowest quarter performance of the year, TFS historic data shows cumulative growth over the past two years. Since September, Global Blue’s base has grown stronger, with increased numbers of merchant partners, especially in Asia. As a result we are seeing +30% growth rates compared to 2013 figures. Despite the impact of the China slowdown on Chinese globe shopper spending overseas, coupled with the immediate (but limited) decline in sales for France following the Paris attacks in November, we are still seeing strong YoY growth for the top 10 TFS globe shopping hot spots and nationalities.

Our data for December shows an increase of +11% vs the same period last year. After far healthier growth rates over the summer months, Q4 growth is mirroring that in Q1 which dropped to +7% in January. December’s growth is the third lowest rate of the year, coming shortly after October’s poor figures.

In terms of share of spend, Global Blue’s strongest performing countries this month are France (14%), the UK (13%), Italy (12%), Germany (12%) and Japan (11%).  While France suffered in the wake of the Paris terrorist attacks, Italy and Germany benefitted from increased sales of +19% and +21% YoY respectively.


China’s luxury slowdown

Growth in Chinese globe shopper spending has slowed to just +16% for December, after the Q4 high of +40% in November. Despite concerns around Chinese luxury spending worldwide, luxury brands are reporting a rebound in demand within the domestic market. Both Burberry and Richemont highlighted a halt in the decline of luxury sales in China in Q3 trading, attributed in part to China’s new breed of middle-class shoppers.

Improving consumer sentiment has prompted analysts at Goldman Sachs to upgrade investor advice on conglomerates LVMH and Kering, even amid expectations that luxury sales growth will continue to slow, according to a report in the Financial Times.


Eurozone focus

TFS spending in Europe increased +11% YoY this month (vs 14% in November and just +1% in October), with slowing Chinese demand for luxury goods and the negative impact on sales in France after the Paris terror attacks being probable reasons for the decline in growth.

France is still the number one TFS destination, with 14% of global share. For December sales growth from Chinese globe shoppers is down to +9% vs +13% in November. The average sales figure for Chinese visitors in France is €1,619 this month, up from €1,567 in November.


Russian gains

Russian globe shoppers are quietly registering less negative growth month-on-month, as consumer confidence slowly returns amid economic reforms. While their spending growth for October fell to the second lowest of the year at -44%,  (which is where it was in December 2014), November sales showed a smaller decline of -30% and December an even smaller one with the highest progression of the year at -12%. Germany remains the favourite country for Russian globe shoppers, where their sales showed less of a decline, reaching -4%.


GB takeouts:

  • Global TFS has slowed to +11% for December YoY, with several factors behind the drop: the Paris attacks, Chinese luxury demand slowdown and Global Blue’s stronger merchant base in Q4.
  • Despite the negative impacts from the market, and looking at two years’ worth of cumulative growth, we are still seeing +30% growth vs the same period in 2013.
  • Russians appear to be reversing their decline in spend, based on the spend progression of the last three months.
  • The Bahamas has quickly become Global Blue’s second most popular destination for American globe shoppers. After less than a year of trading here, we are seeing Americans’ spend growth equal to France.