EAST RUTHERFORD, N.J.--(BUSINESS WIRE)--Hudson Ltd. (NYSE:HUD), a leader in North American travel retail, announced today its results for the quarter ended September 30, 2018.

Highlights for the Quarter:

• Turnover of $526.6 million, a year-over-year increase of 6.0%;
• Organic net sales growth of 6.5%, which includes 90 basis point currency headwind;
• Like-for-like net sales growth of 3.3% (4.2% constant currency);
• Gross margin of 63.7%, a year-over-year expansion of 160 basis points;
• Adjusted EBITDA of $76.2 million, a year-over-year increase of 27.6% (or 9.3% assuming the reduced franchise fee rates currently paid to Dufry1 had been in effect in the third quarter of 2017);

“Our solid third quarter results are highlighted by like-for-like sales growth of 4.2% in constant currency and the continued execution of key productivity initiatives and product launches,” stated Joe DiDomizio, President and CEO of Hudson Group. “We had a number of notable, productive new store openings during the quarter, including specialty retail locations in Dallas/Fort Worth International and Hartsfield–Jackson Atlanta International airports, which demonstrated our ability to maximize productivity in any given footprint by leveraging our diverse portfolio of retail concepts and product lines. Looking ahead, we are excited by the pipeline of opportunities to expand our strong footprint of leading travel retail concepts to drive top line growth and enhance profitability.”

Third Quarter 2018 Summary

• Turnover increased $30.0 million or 6.0% to $526.6 million for the third quarter 2018 compared to $496.6 million in the third quarter of 2017.
  • Net sales increased $31.2 million or 6.4% to $516.8 million from the year-ago period;
  • Organic net sales growth, which is a combination of like-for-like net sales growth and net new business and expansions, was 6.5%, compared to 8.4% in the year-ago period;
  • Like-for-like growth was 3.3% (4.2% in constant currency), compared to 3.7% (2.8% in constant currency) in the year-ago period primarily due to negative currency movements as the Canadian dollar weakened versus the U.S. dollar as compared to the prior year quarter, partially offsetby a higher number of transactions in the current period due to the impact of last year’s hurricanes on air travel in the year-ago period.
• Gross profit increased $27.0 million or 8.8% to $335.5 million in the third quarter compared to $308.5 million in the year-ago period. Gross margin increased 160 bps to 63.7% in the quarter due to improved vendor terms as well as continued sales mix shift to higher margin categories.

• Selling expenses increased $8.2 million or 7.2% to $121.7 million in the third quarter as compared to the year-ago period, driven primarily by concession fees, which comprise the majority of this item and is mostly a variable expense driven by net sales. For the quarter, selling expenses as a percentage of turnover totaled 23.1% compared to 22.9% in the prior year quarter primarily due to higher credit card transaction fees.
• Personnel expenses increased $9.7 million or 10.1% to $105.4 million in the third quarter as compared to the year-ago period. As a percentage of turnover, personnel expenses increased from 19.3% to 20.0% this quarter. The increase in personnel expenses was primarily driven by new hires associated with opening new store locations, wage increases and additional personnel expense upon becoming a public company.
• General and administrative expenses decreased $7.2 million or 18.2% to $32.3 million in the third quarter as compared to the year ago period due to the reduction of franchise fees paid to Dufry starting January 1, 2018, partially offset by higher professional fees upon becoming a public company. As a percentage of turnover, this item decreased from 8.0% to 6.1%.
• Adjusted EBITDA increased $16.5 million or 27.6% to $76.2 million in the third quarter as compared to the prior year quarter, and adjusted EBITDA margin increased from 12.0% to 14.5%. Assuming the reduced franchise fee rates we currently pay Dufry had been in effect in the third quarter of 2017, adjusted EBITDA for the quarter would have increased $6.5 million or 9.3% instead of 27.6%, as compared to the year ago period.
• Reported net earnings attributable to equity holders of the parent increased $13.1 million to $26.6 million in the third quarter compared to $13.5 million in the year ago quarter while reported diluted earnings per share increased to $0.29 per share compared to $0.15 in the prior year quarter.
• Adjusted net earnings attributable to equity holders of the parent increased $20.4 million to $37.5 million in the third quarter compared to $17.1 million in the year ago quarter, while adjusted earnings per share increased from $0.18 to $0.41.

Balance Sheet and Cash Flow Highlights

• Cash flows from operating activities for the quarter decreased to $75.2 million compared to $88.0 million in the prior year quarter due to timing of working capital changes, partially offset by an improvement in operating performance.
• Capital expenditures in the quarter totaled $18.2 million compared to $15.6 million in the prior year quarter.
• At September 30, 2018, the Company’s net debt was $303.6 million resulting in net debt leverage of 1.3 times, compared to net debt of $375.6 million and net debt leverage of 2.4 times at September 30, 2017.

Operational Update

As of September 30, 2018, Hudson Group operated 1,016 stores, across 87 locations, totaling 1.1 million square feet of retail space.

During the third quarter, Hudson expanded its footprint in existing markets though an RFP win at Philadelphia International Airport.

The Company also successfully extended an existing contract at the Chicago Citigroup Center.

About Hudson Group

Hudson Group (NYSE:HUD), a Dufry Company and one of the largest travel retailers in North America, is committed to enhancing the travel experience for over 300,000 travelers every day in the continental United States and Canada. The Company is anchored by its iconic Hudson, Hudson News and Hudson Bookseller brands and operates over 1,000 duty-paid and duty-free stores in 87 locations, including airports, commuter terminals, hotels and some of the most visited landmarks and tourist destinations in the world. Our wide range of store concepts include travel essentials and convenience stores, bookstores, duty-free shops, branded specialty stores, electronics stores, and quick-service food and beverage outlets. For more information, visit www.hudsongroup.com and www.dufry.com.