Ladies and gentlemen, welcome to the Avolta Q1 2025 Trading Update Conference Call and Live Webcast. I am Maria, the course call operator. I would like to remind you that all participants will be in listen-only mode and the conference is being recorded. The presentation will be followed by a Q&A session. You can register for questions at any time by pressing Star and 1 on your telephone. Webcast viewers may submit their questions in writing via the relative field. For operator assistance, please press Star and 0. The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Mr. Xavier Rossinyol, CEO of Avolta. You will now be joined into the conference room.
Good morning, good afternoon, everybody, and thank you for being here today in this Quarter One Trading Update of Avolta. We're going to make a presentation together with our CFO, Yves Gerster. I'm going to go straight to slide number four of our presentation. Quarter One, and we are also giving data on year-to-date April, has started very strongly. We have reported on currency exchange rate, a turnover growth of 8.2% on the first quarter, with an organic of 5.3%. If we take into consideration that last year, February, was a leap year, the comparable growth on Quarter One will be organically 6.5%. Our core turnover has also increased nicely in April. We already disclosed that there are some seasonality moves this year, Easter being in April instead of March.
As we already said, we believe that the year-to-date April is the right way to look at the performance of the company. That will be even slightly better than Quarter One, with an 8.5% total growth at currency exchange rate and 5.7% organic. Without the leap year effect, the organic will be 6.6%. Very well in the long-term outlook of 5-7% per year. Core EBITDA has reached CHF 196 million, which is an EBITDA margin of 16.3%, again on the top part of the range of our outlook, 37 basis points. Equity-free cash flow is difficult to look at the first quarter because low season, no Easter. If we take into consideration the seasonal effects, it is negative, CHF 104 million, but it is in line with what you see on first quarter. Does not change our outlook for the year.
Capital allocation, we will go on that a little bit later, but we confirm that our capital allocation remains unchanged, focused on deleveraging, and we continue to deleverage. If we compare the leverage of Quarter One 2025 versus the first quarter of last year, we went from 2.6 to 2.2 times net debt to leverage. We remain with a very strong liquidity, and we keep committed to the share buyback and the dividend distribution. Yesterday, in the General Assembly, it was approved a distribution of CHF 1 per share. This is an increase of 43% year on year on the dividend. Of the CHF 200 million share buyback we announced, we already bought CHF 49 million in shares in the first quarter.
I'll explain a little bit more of that in detail, but we continue with the transformation of our shops, our restaurants, and also on the digital transformation. We have robust business development in all the regions: Europe, Middle East, Africa, North America, Latin America, and Asia Pacific. If we go now to the next slide, we can see one of the strengths of Avolta: our diversification. Geographical diversification, business lines diversification with one-third to duty free, one-third to duty paid, one-third in food and beverage. We can also see a good balance on channels and category mix. Thanks to this diversification, we have been able to report a very strong organic growth, like-for-like growth, and a strong growth despite one of the regions performing a little bit weaker.
We all know that due to the general economic and financial situation in the U.S., the number of passengers in that part of the world are being flat during this year until April. With that flat passengers, we also report flattish sales, slightly positive if you take into consideration the change of scope, but largely flat. Despite that, and thanks to our strong diversification, we have shown well in the outlook, the total performance. We have received some questions over the last few hours, like we received. I mean, a few months back, people were worried about the Chinese consumption. Prior to that, the Ukraine-Russia war, also some concerns on the Middle East. Over and over, we keep reporting, and I think this is the ninth consecutive quarter where we report higher sales.
We always, with a group as diverse and big as us, we will have different performance in different parts of the world. The important thing is that overall, we see a good strength. The combination of March and April, it shows a performance that is in line with the year-to-date. Therefore, we believe that the year-to-date is the best example in April on how we are performing as a group. If we move to the next slide, we can see that this performance is extremely strong in EMEA and Latin America. It is strong in Asia Pacific, and as I just said, a little bit weaker in North America. If we look at the like-for-like, we have 8% in EMEA, 1.3% in North America, 3.4% in Asia Pacific, and 5.5% in Latin America. If we go to the next slide, we continue with the commercial and digital transformation.
We have 32 new stores since our last reporting, including completely new concepts like premium tea in China, Hungry Club in Malaga. As you know, this is an F&B concept that we put inside the duty-free stores, so it's a hybrid concept. We continue with the cross-promotion, so the combination on F&B and retail keeps yielding good results. We put also completely new concepts as part of this new focus on surprising the consumer and increasing the spend per passenger. We have, for example, two new Fragonard boutiques in Nice, Gourmand in Barcelona. We keep pushing very hard on the entertainment. We are every month more and more convinced that this combination of entertainment, new concepts, new shops, a combination of food and beverage and retail, is the way forward to consistently keep growing organically ahead of the passengers. Not forgetting also the digital and data transformation.
Club Avolta continues to grow. We added another million members in Quarter One. All the data, recruiting, spend per ticket, importance of the loyalty sales in the total have accelerated in Quarter One 2025 versus Quarter Four 2024. We continue going in the right direction. We cannot underestimate the value we will have over time of this added intimacy with the loyal customers. We learn a lot about that, and we can keep improving our offering, our pricing, our promotions, the way we interact with consumers thanks to this increased number of data. Gaming. Gaming is another aspect of the loyalty and, in general, of our interaction with passengers that is proving very interesting to increase the time we have a relationship with those customers. If we move to the next slide in a second, I have a small video.
You know we always have two constants in these presentations, or three. Consistent results, happiness for Football Club Barcelona, and a video. I am going to go now to the video, and I will come back in a second.
At the dawn of a new era in travel, our journey began with a promise, a promise of innovation, elegance, and connection. We are fully delivering on those promises. This is Avolta, where the future of travel retail unfolds. We are offering a world where shopping and technology merge, where every step is designed for a flawless experience. Here, intelligent solutions transform everyday moments into extraordinary milestones, paving the way for a smarter, richer journey. Across continents, our vision transcends borders. From Bali to LA, from Stockholm to Barcelona, Avolta redefines travel retail by fusing state-of-the-art design with the heart of a global community. Behind every innovation stands an incredible team, united worldwide by passion and expertise. As we chart a course for the future, we now also honor our loyal community through Club Avolta, a global loyalty program uniting all Avolta shops under one innovative umbrella.
With exclusive rewards and personalized experiences, Club Avolta turns every purchase into a milestone celebrated. Join us on a journey where every moment is an experience, and every destination writes a new chapter of possibility. Because your journey deserves to be elevated. Avolta. Journey on.
Now, our CFO is going to explain a little bit more detailed Quarter One results. Thank you, Yves.
Thank you very much, Xavier, and good morning and good afternoon to everybody on the line. In the first quarter of 2025, turnover came in at CHF 3.05 billion. That represents an organic growth of 5.3%. If you leave away the leap year effect of 2024, organic growth would have been 6.5%. That basically is at the upper end of our medium-term guidance of 5-7% growth on organic growth for the group. For EBITDA and also equity-free cash flow, our other two main KPIs, I would like to go directly to the next slide, slide number 11. Core EBITDA came in at CHF 196 million. That represents 6.4% EBITDA margin, an improvement of 37 basis points compared to previous year. Also, that represents the upper end of the guidance of 20-40 basis points of our medium-term guidance.
free cash flow came in at CHF -104 million in the first quarter this year versus the CHF 80 million last year. It's a little bit softer, but there are two reasons for that. Number one, it's the typical seasonality we see with a negative first quarter in every single year. Number two, it's the Easter effect, which this year, Easter happened in April versus last year, where Easter happened already in Q1. Basically, we build up inventory, buy ahead of the Easter effect when Easter only happens, and we collect the money in April this year. It's a certain delay. Those are just movements between the quarter. Overall, we have no implications in our expectations for the cash flow for this year and also not for our medium-term guidance.
If I move on to the next slide, slide number 12, with the typical leverage and also the maturity profile. The company has deleveraged nicely year on year, coming from 2.55 in the first quarter at the end of the first quarter 2024 to 2.18 in the first quarter or at the end of the first quarter this year. An improvement of close to 0.4 times year on year. If you're looking at the maturity profile, there is nothing specific new. It's a very diversified profile when you look at the different currencies, maturities, and also the fixed to floating rate debt mix we observe there. To the maturities in 2026, in the first and second quarter, the CHF 500 million convertible and the CHF 300 million Swiss franc bond, there we do plan to refinance them ahead. We will do that opportunistically.
As you know, we have access to more than CHF 2 billion of liquidity at the moment. There is actually no requirement strictly to refinance that. Nevertheless, we are looking into that as we speak, and we plan to refinance it with a combination of cash on the balance sheet and potentially a new bond. Stay tuned for news there anytime soon. Having said that, I hand over back to Xavier.
If we go now to page 14, just to repeat once more, another quarter where we confirm our confidence in the full year outlook and on the outlook for the next few years. As we stated several times, we believe this company should be growing to between 5% and 7% organic growth, expanding EBITDA margin between 20 and 40 basis points, and expanding the equity-free cash flow conversion between 100 and 150 basis points for every year. We confirm that with the data we have so far, we believe that would also be the case for 2025. If we move to the next slide, again, it's exactly the same slide we have put in the last few quarters. I think it's important to reconfirm once more our capital allocation policy. Number one is to keep investing in the growth.
We see a lot of opportunities in the commercial and digital transformation and on the business development. From time to time, we might be addressing some bolt-on M&A to complement this growth only on an accretive manner and using debt if necessary. Second, to keep a very strong discipline on the balance sheet, targeting a leverage of one and a half to two times, potentially going to two and a half from time to time if that is needed. Last but not least, to focus on the return on shareholders in a combination of a progressive dividend, a third of our equity-free cash flow on a yearly basis, and when needed, when there is excess cash, share buyback. We did one last year. We are doing one this year.
I think what is important, if you look at our quarterly trading update, is that everything that is in this page and everything that was in the previous page is happening once more. If we go now to the last page, the conclusion, it is just to reconfirm what we keep saying. We are a strongly diversified company. We see strength quarter over quarter on our focus strategy, and we are delivering in all the key financial and commercial metrics. We are increasing sales. We are transforming the company digitally and physically, and we are delivering on the expansion of margins. The strength of our diversified portfolio is seen for the last three years in a very strong manner. We always have something performing below expectations, but other things more than compensate for that.
Our commitment as management team and also on the board of directors is to focus on value creation for the shareholders. On that, also, we are delivering. With that, I thank all the audience, especially the ones that are not only listening to the calls, but they are also nice customers of Avolta in any shop or restaurant around the world. I particularly thank the loyal members that have Club Avolta. I cannot finish without thanking once more all the employees, all the team members across all our 5,200 points of sales. Thanks to you, we keep delivering strong results quarter after quarter. You have my full appreciation. Thank you very much. Now we can open Q&A.
We will now begin the question and answer session. Anyone who wishes to ask a question may press Star and One on their telephone. You will hear a tone to confirm that you have entered the queue. If you wish to remove yourself from the question queue, you may press Star and Two. Questioners on the phone are requested to disable the loudspeaker mode and eventually turn off the volume from the webcast while asking a question. Webcast viewers may submit their questions in writing via the relative field. Anyone who has a question may press Star and One at this time. The first question comes from Manjari Dhar from RBC. Please go ahead.
Good afternoon. It's Manjari Dhar at RBC. I just had two questions, if I may, both around the U.S. Xavier, I wondered if you could give some color about how you guys are thinking about the need to bring in more labor across peak in the U.S. now. I suppose if the situation in North America does improve, how quickly can you sort of bring or ramp up additional labor as needed? Secondly, just on net new concessions, I just wondered when we should expect the JFK wins to start to contribute positively to that and how we should think about this line for the rest of the year. Thank you.
Thank you very much. If I understood well, the first question is, if the recovery in the U.S. comes, how can we get back the people we need to serve? If that's the question, I'm going to answer that question. If the question was another one, look, to be clear, the first thing you do if you have a peak up in the sales is to try to use more hours of the existing labor force. That is something you can do fast. It comes with a small premium, but perfectly affordable. To onboard new people, it always takes a little bit longer. If the sales will recover in the U.S. in the second half of the year, that will be a nice problem to have, and we will find the way to manage it.
We also have been doing over the last couple of years an important investment on self-checkouts, which, of course, gives you extra flexibility and the self-ordering in our restaurants. In that sense, if the recovery comes faster than some people anticipate, we should be prepared for that. On the net new concessions, the JFK, as you know, we have won many concessions. They start in different spaces. Some of them start at the end of this year, but realistically, you will see an impact in 2026, 2027 in a more material way.
Great. That's all very clear. Thank you.
The next question comes from Jon Cox from Kepler Cheuvreux. Please go ahead.
Yeah, good afternoon, guys. John with Kepler Cheuvreux. A couple of questions for you if I can, one of which is the first one. On North America, I'm just wondering what you're planning with regard to North America this year, i.e., if we do have flat sales all year in the U.S., can you get your minimum 5% growth? Some sort of comment on that would be useful. The second one is on sort of spend per passenger. I'm looking at the U.S., and it's the figure that you've printed. Basically, though, the passengers are more or less in line and actually look a little bit better than your figures. I wonder if you can talk about maybe the fact that you seem to have maybe less spend per passenger in the U.S., I wonder if there's some sort of deflation or what that could be.
In contrast as well, on the Europe side, you're growing almost 10% in the first quarter, but passengers probably on average somewhere around mid-single digit. I wonder if you can also comment on why you're doing so well in Europe at the moment compared to the U.S. Then final question, just on the CVC reports and the Benettons, maybe be interested in doing something or changing something with regard to you guys' takeover or whatever it may be, if you have any comment on that at all. Thanks very much.
Thank you. Look, on your first question, yes, we think that would not be easy, but if North America or the U.S. is flat, we should also be able to be in our guidance or in our outlook for the year because we see very strong underlying demand on the rest of the regions. I'm not sure on the spend per passenger on the North America, how you calculate it. It's not easy because we are in many airports, but not in all the airports. If you look at the like-for-like of quarter one, in North America was plus 1.3%. Passengers in North America have been lower than that. There is not a major improvement on the spend per passenger in North America. Also, it's difficult to measure there more than in other regions because it's largely domestic. In general, you don't see a massive slowdown.
You do not see a massive improvement either. I think it is flattest passengers, flattest spend per passenger in North America. Yes, we are doing very well on a spend per passenger in the rest of the regions. We see very strong demand, and we see that the actions we have been taking over the last two years to transform the company to be more focused on the customer experience, the new shops, the hybrids, the entertainment, the Club Avolta, all that, it is supporting an increase on the spend per passenger. Everywhere, all the time? No. We are also learning. The more parts of the network we have with a new way of doing business, the stronger we see the performance. On CVC, you might be surprised. I am going to say exactly what we have been consistently saying.
We do not comment on market rumors, and we are not going to comment on this one. Thank you, John, for your questions.
I want to just follow up. So basically, you're planning internally for a flat North American market this year. If it gets better, yes, that's great, but you're not assuming any improvement in North America this year.
The problem with your question is you always have a follow-up. Look, let me state our target is to be between the 5% and the 7% on this. If the U.S. does not recover or it does not recover in a substantial manner, we should be in one side of the range, and if it recovers, on the other side of the range. Make sense?
Thank you. Yep.
The next question comes from Tim Barrett from Deutsche Bank. Please go ahead.
Hi. Thanks, both of you. I had two things as well. Just picking up on the geographically, you talked about having areas that are performing better to offset North America. It looks mostly like that's Latin America. So can you give us a bit more color on LATAM and how that is managing to produce such good growth? And then my second question, I take the point about North American passengers being flat in the first quarter, but international passengers were down a lot. Is that impacting certain categories, I suppose, duty free versus food and beverage? Thanks very much.
Thank you. Just to make sure, I mean, we have a strong performance not only in Latin America, but also in EMEA, that is our number one region in size. In Europe, we are performing well across the board with a few exceptions like the Nordics that, you know, they are affected by the restrictions on the Russian airspace. Very good performance in the south of Europe and good performance in the central U.K., etc. Very strong performance across the Middle East and Africa also. Latin America, very strong performance across all the parts of the region. Maybe a few exceptions on those destinations that are more heavy on green card holders that might be going back home two, three times a year normally, and now they might be restricting that for the reasons you know.
As you can see, that does not have a major impact on the overall performance of Latin America that you were asking. International passengers, it's very interesting. There is a clear change in North America on the profile. You have, for example, to give two extreme cases, much less Canadian, many more Argentinians. The profile is changing. You need to remember also that 80-plus % of our business in North America is domestic business. It's food and beverage and convenience duty paid. International traffic affects the duty-free and is much smaller than in other regions in North America. Also, you have international traffic out of Canada, a much smaller market, but our duty-free in Canada is more important.
Okay. Thanks. So basically, duty free is likely to do one of the weaker performances this year. You agree with that?
No. Look, what is affecting us in North America? Look, the people when travel international, first, we have strong numbers in Canada that duty-free-wise is bigger or almost as big as US. When people travel internationally, they are already spending a significant amount of money, so they are much more resilient on consumption. Duty-free is holding quite well. Where we see weakness is in domestic traffic. I mean, Americans adapt very fast to the good news and the bad news. There are some forecasts of a weak economy for the remaining of the year, and that prevents consumption. More on the decision to travel or not to travel more than spending when they travel. As you see the forecast of the big American banks, they are a little bit more optimistic now than they were two months ago. That could change again.
The likelihood of a recession today is regarded as a little bit lower than before. Any good news that incentivizes the consumption, it will be reflected in our numbers. For the first time over the last almost three years, we see a slow decrease over the last couple of weeks on the airfares. Airlines make no secret that they are adapting a little bit their prices to try to boost demand. That could also be positive. If you ask me personally, I think we're going to see a little bit of recovery on the second part of the year. As people do not give you credibility for macroeconomic forecasts now, I rather say what I said earlier on. The overall performance will be in our outlook, but North America could give us potentially some good news in the later part of the year.
We are not factoring that because it's uncertain what is going to happen. Is that clear now?
Yeah, that's really helpful. Thank you both.
Thank you.
The next question comes from Joern Iffert from UBS. Please go ahead.
Hello, everybody. Thanks for taking my questions. I would have three, please. We'll take them one by one if this is okay. The first question, just to double-check, you mentioned March and April together was more or less in line with the year-to-date performance on organic growth. Just to double-check, are there any factors you identified in April incrementally if you exclude the Easter benefit, which is varying you a little bit, or is it even vice versa going into May and June?
I mean, you have all kinds of effects month on month. I mean, you have the number of weekends, number of local holidays from Carnival to Ramadan to you name it. The major one on the consolidated group, the major effect between March and April, as we previously disclosed, is that Easter is in April this year, and it was in March last year. It's not rocket science. I mean, it's not mathematical that if you have Easter, it depends if Easter is a little bit earlier, a little bit later. It depends also on other school holidays, etc. Overall, when we consider the year-to-date data, we are happy with what we are seeing. Easter in April was as expected for us across the board. We are seeing strong first four months of the year. I think that was your question.
Yeah. Is there in April any signs which are worrying you or even making you more confident if you would exclude the Easter effect from the April data?
I think.
But understand.
Not more, not less. I mean, it's consistent. There is not a major negative or a major positive in April. We see similar trends.
Okay. Thank you. On the strong performance in EMEA of the plus 9% organic, what would you say is the contribution of your initiatives, the self-help initiatives, self-checkouts, the app, etc.? Is it 2-3%? Is it 1-2%? Just to have a rough feeling, what is your best guess here?
Look, I think I have said a few times in earlier calls that our target would be to have a like-for-like growth that is two-thirds coming from passengers and one-third from our initiatives, roughly. I think that's more or less what we are seeing. Maybe a little bit more on these first few months on some of the initiatives. I think as a rule of thumb, if we think about the longer term, that's the type of metrics I'd like to use also internally to discuss with the team.
Good. Thanks. The last question, if I may, the acquisition in China and the 3 percentage points contribution, is this margin accretive? How sustainable do you think this concession will be in the future?
Everything we do, we target to be margin accretive. Of course, everything that is related to Chinese consumers, and I think we have made no secret of that, we are not at the historical levels. Chinese consume less than it used to do, not only on the travel. You can see that on the macroeconomic data. We believe that was a great opportunity to enter a very good market at very good terms and conditions. We are happy with what we're seeing. It's in line with our expectations. I don't know what you mean sustainable. Of course, everything we do, we try to be sustainable on the long term. We hope that what we are seeing, it will continue to be the case in the future.
Of course, it will be much more accretive if on top of what we are seeing, there will be a certain recovery on the consumption of the Chinese. Everything we do in Asia Pacific or anywhere else that involves Chinese travelers, we are doing it assuming current levels of expenditure. We are not betting on going back to pre-COVID. That is not the way we do our business plans and our investment decisions. If there is a massive recovery, all that will be extra. We are assuming a reasonable growth on current levels.
When I was talking to you about sustainability, it was about that the transaction price seems very low for the revenues you have brought in. I wanted to check if this deal is margin accretive and if this concession, for example, is expiring in two years and you do not know if you can prolong it or not. This was on sustainability what I was asking for.
Okay. As you know, we do not go into the detail of specific concession renewals because that would be very difficult to manage. In general, we are having a renewal rate of 90%. I think we have disclosed that. We are starting to see a slightly positive net contribution of new concessions. As you know, the first couple of years after the presentation of the new strategy, we were cleaning up a little bit the portfolio. Now, we are starting to see some positive, and we believe that this net contribution, it should be increasing a little bit more over the next few years, looking at the balance we are seeing of wins and losses step by step. Our focus on accretion or return on investment continues being paramount.
We made very clear if we have 0.2% of new concession, 0.5%, 1%, we are equally happy because our focus is making sure that any number we add is adding new cash flow, and it is a profitable and a good return on investment. We do not talk about market shares. We do not talk about specific targets on this because the discipline on the financial side and the accretion on the equity-free cash flow is what really matters to us. Of course, we might make mistakes like everybody else, but never intentionally.
Thank you very much.
The next question comes from Jaafar Mestari from BNP Paribas. Please go ahead.
Hi. Good afternoon. I've got three, if that's okay. Firstly, I'm sorry to be doing some live simplistic math, but on your commentary that March and April trends are consistent, I just want to go back on the Easter impact. Last year, your Q1 organic growth was 8.6%, but that was boosted by Easter, and your four-month organic growth was 7%. Simplistically, this would have led me to believe that the Easter impact is about 1.5% positive or 1.5% negative on the four-month basis. This year, your Q1 is 5.3%. When you take the four months, it's improving. It's only improving to 5.7%. I guess my question here is, is the impact of Easter not as simple as that? We should look at it in a more complex way. Or is the impact of Easter about that, but then there's been some underlying deceleration into April?
I know many people have asked the question in different ways, but just want to make sure 8.6-7 and then 5.3-5.7, we're looking at the right numbers.
It is much more complex than that.
I'm sorry. I'm sure it is. Sorry.
No, no, no. You ask all the questions if you prefer.
As you prefer. Second question, just can you remind us, please, conceptually in your business, what sort of indicators you have looking into the next months? What sort of visibility? You obviously have no material advance sales, maybe just a little bit of pre-ordering. When you talk about North America staying flat or improving, when you sound very confident about EMEA staying at those very strong levels, what are some of the inputs, please, in your reasoning? Just lastly, very open-ended, EMEA is very strong. There are some comments on new concepts, talked about Spain a little bit, but just a bit more detail on passenger behavior you're seeing. Which origins are you seeing performing very well? Which product categories, British tourists into Spain? Any of those trends, please, behind the strong EMEA?
Good. For good and for bad, otherwise everybody could do the math. The Easter effect is much more complex than you described. Unfortunately, you cannot go through, as we do, airport by airport. You need to see the weighted average of the different airports, the behavior also weather-wise independent of the different countries. You have the leap year last year. You also have some increase last year first quarter that was motivated by works on the previous year in Spain, for example. The calculation you did to just take the quarter one difference and then apply it to April does not work this way. I can tell you that what we have seen in Easter and what we have seen in April is positive, is in line with our expectations, actually slightly ahead of our internal forecast. April has been strong.
The first four months of the year have been strong. KPIs we look at. Look, we talk to all our airports. We gather any public forecasting. We see the bookings in airlines. We also look at hotels when it's relevant. We have our own forecasting model. We have a pretty sophisticated way because we look at sales per location, per store, per day. And through historical performance, we have a pretty good forecasting system. Our team gives us forecasted weekly sales, and we monitor those. Of course, with machine learning, you keep learning on the mistakes. It considers weather. It considers weekends. It considers local holidays. It considers all that. We have a lot of data. It doesn't mean we are always perfect on forecasting. The longer you try to forecast, the more difficult it is.
Sometimes it's easier to forecast the full year than to forecast one specific week because of the law of the big numbers. Look, I would love to answer your last question, but I realize that we have more and better data on consumer behavior in more places than any of our competitors. We are the only ones we keep explaining. I am going to be just giving some examples, but I am not going to go into the detail. As I said, we see very strong performance on all the touristic destinations despite not being a touristic holiday. We see strong performance in the south of Europe. We see strong performance in Africa and the Middle East. We see strong performance across Europe. Not all the markets are the same. The U.K. is not the same as Finland that is affected by the Russian airspace.
EMEA is very strong, but not only EMEA. Also, we have very strong in Latin America, as we discussed earlier on. In Asia Pacific, we have some locations more affected by the Chinese consumptions, but all other spaces, we also have very strong growth. With a few exceptions, we see a general strong growth on the first four months of the year.
Thank you. No follow-ups.
Very much.
The next question comes from Ali Naqvi from HSBC. Please go ahead.
Hi. Thanks for taking the questions. Yves, one for you, please. On the U.S. market and cost management, if the U.S. is running at flat, what levers can you pull to manage your costs? At what point can you manage this so it does not impact your 20-40 basis points EPTA margin guidance? What will get you to the low and the top end of the range, please? Secondly, Javi, just in terms of the bid environment that you are seeing, especially in the U.S., is there any notable changes to the bidding environment as a result of the tariffs, trade negotiations, and just the U.S. macro? Yeah, I will just start with those, please.
Let's start. Look, on the U.S. cost structure—thank you very much for the question, Ali. Look, on the U.S. cost structure, as you know, in our business model, we have already, by definition, a very flexible cost structure. Most of the lines are flexible or de facto flexible and linked to the turnover of the organization. Now, if I look at COGS, this is purely variable. If I look at concession fee, this is more variable or tends to be overproportionately variable in North America due to the specific focus we have there on food and beverage, where minimum annual guarantee are typically much lower than in duty free. Proportionally, the same applies for convenience stores. Already there, also from one of the key lines, which is a little bit more sticky in the cost structure for North America, it is more flexible than on average.
The same applies for personal expenses. Javi has mentioned it before. There is flexibility in the working hours, etc., and also on the general expenses. Already from that perspective, a very good starting point. On top of that, with the slowdown, we have obviously taken some actions, some plans to adapt, which we can take from the shelf in case there is a further slowdown in North America to make sure we protect and safeguard the profitability, but also the cash flow of the organization in that regard.
Your second question on the bidding environment, particularly in the U.S., maybe it's not extremely noticeable yet, but of course, as a member of our executive team says, never miss the opportunity of a good crisis. I think historically, let me put it this way, if there is a slowdown, it could increase the opportunities on business development. It's not that we see it massively yet, but I think it could be a positive act on the behavior of the market.
Understood. Thank you. Then just finally, I know you've commented on all of your initiatives that you'd like to do. We would hope to make one-third of your like-for-like sales. I suppose just specifically on the digital initiatives, how much of that would you say has been started to be implemented versus how much more runway there is to carry on applying over the years? Are you at the start of the journey or towards the end of the journey?
I think we are in the early start of the journey. I think if I look at it in relative terms, what we have done over the last couple of years on digital transformation, I think it's pretty amazing. If I look in absolute terms, where we are versus what we could be, I think the journey ahead of us is massive. Part of it is because only when we do that journey, we realize how much more potential there is. For every new initiative we complete, there is a ratio on the digital transformation of three to one, three new doors that open to keep exploring.
Right now, one of our challenges, and we are pushing ahead strongly with that, is, for example, hiring more data scientists and reinforcing our data team because with the success of Club Avolta, we realize we are not taking full advantage of it because we lack certain resources. The opportunity in that sense, and I'm not talking about the opportunity only in the next few months, I'm talking about the opportunity in the next five years at least of keep transforming and improving the company thanks to the data and digital transformation.
Great. Thanks.
Thank you.
The next question comes from Gian Marco Bello from Zürcher Kantonalbank. Please go ahead.
Good afternoon, Yves and Xavier. I have just one question remaining for your initiatives in the U.S. and also in relation to your growth variables. If you mentioned in the U.S., passenger growth is nearly flat. On the other side, spending per passenger is nearly flat. Is it then also fair to assume that also your progress to increase the store visits and the conversion ratio is so far still in the early stage? Can you a little bit elaborate about your experiences there? Thank you.
No, look, the conversion rate and the spend per passenger is improving across the group. What happens in the U.S. is that the American consumer is expecting a recession, and they behave as such. I do not think it is easy to have a comparable basis. I am sure that you are going to see much more in the U.S., like we are seeing in the rest of the world when the situation, the financial and economic, macroeconomic situation improves a little bit. We are stronger on consumption in the travel environment than in the local market, and that is very clear. If you look at some of the retail data in the U.S., it is much worse than what we are seeing in the travel space. It still proves that when people travel, they consume on a more normalized basis, but we are not 100% immune.
If you go to the U.S., there is certain worry, general worry about the potential risk of a recession. If you discount that effect, actually you could claim, if you look at general retailing in the U.S. and you compare it to us, that our spend per passenger on a comparable basis post-recession fears is actually super positive because keeping consumption in the current environment in the U.S. today, I have to say, talking to some of our suppliers, for example, and what they are seeing on the local market with the same products we sell at the airports, they are super positively surprised on how well we are holding in the travel environment.
Thank you. Thank you.
For any further questions, please press star and one. Webcast viewers may submit their questions in writing via the relevant field. The next question comes from Manuel Lang from Vontobel. Please go ahead.
Hey, everyone. Manuel Lang from Vontobel. I have two questions. The first one would be, I'm sure that you read about the discontinuation of the onboard duty-free sale at Lufthansa. I'm just wondering what's your view on that? Do you see more airlines going into that direction? How big of an impact do you think this will have on spend per passenger, especially in EMEA for airports? The second one is regarding product categories. I saw you managed there to increase the sales of wine and spirits and also tobacco products more than in other categories. I'm just wondering what's the drivers of this development, especially compared to Q1 in 2024? Thank you.
Look, the duty-free onboard is not a massively large market, but of course, any discontinuation there, it would be a marginal positive for us or for the industry. In that sense, that would be, again, a small potential upside. On product categories, it's very difficult to look at product categories per quarter because it also depends on the performance of every region, every sub-region. There are no major conclusions I would like to point out based on the quarter one. A small one that is easy to understand, the two categories you pointed out are more on the duty-free side. A market like the US, where it's largely domestic, food and beverage, and convenience, those categories are less important. Just this effect, pure weighted average is already playing there. There are other trends.
If you remember, we have proven over the last two, three years that when trends change on a category, on a specific, talking about wine and spirits, it could be more popular, the vodka, or it could be the whiskey, or it could be the tequila, we have the capacity to adapt and sell any of those different products. If one brand becomes more popular, one of the things we are trying to do step by step is one of the pillars of our strategy, consumer focus, geographical diversification, and operational improvements, is to increase the speed to market. One of the things that helps you to improve sales if you're faster in bringing the merchandise and adapting the offer to the trends that we are just discussing. That would be, if that's okay with you, the way I would like to frame it.
Yes. Thanks a lot.
Thank you.
We have a question from the webcast from Thomas Helton from DZ Bank AG asking, do you expect any effect on the ongoing tariff dispute triggered by the U.S.?
I mean, as you can see on our numbers, we don't see any negative effect on our sales or profitability due to the ongoing discussions. Look, this company is in 70 countries. Particularly in the duty free, we manage at least 70 legislations, quite a few more because some countries are federal and they have different. So hundreds of legislations. We have hundreds of interactions with different currency movements. We sell in hard currency, US dollar, euro, British pound, but they affected the local currency. We are very, very used over the last 50 years to manage legislation changes, tariff changes, currency changes. We always try to be smart to spot the opportunities because some of the things we are seeing could be an opportunity, for example, on smart pricing, on flexible pricing, on proper promotions.
Of course, we are monitoring, and when it could produce a cost increase, we are addressing it, but it could also have some positives here and there on a smart management. These things, we try to identify how we can make those an opportunity to better serve our customers.
We have another question from the webcast from Thomas Bender from Apres Demain asking, could you give us the timing of the issue of the bond? Thanks in advance for the clarification.
Thank you very much for the question. Look, as I have mentioned during the presentation, we do that opportunistically. We have enough liquidity. We have the RCF, which is largely unused. We have cash on the balance sheet. There is no requirement to refinance it with a bond. If market conditions allow, can happen very soon.
There are no more questions at this time. I would now like to turn the conference back over to the speakers for any closing remarks.
Just a big thanks for everybody that attended this call and all your questions and interest. As Avolta management and all the team members, we are committed to our strategy and delivering shareholder value every quarter. Thank you for your attention.
Ladies and gentlemen, the conference is now over. Thank you for choosing Carouscal and thank you for participating in the conference. You may now disconnect your lines. Goodbye.