LVMH’s DFS Group Sells Hong Kong, Macau Stores—and Scraps Key Hainan Project

Pedestrians walk past T Galleria by DFS in Tsim Sha Tsui, Kowloon, Hong Kong.

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The sale of luxury travel retailer DFS Group has been steadily reducing the company’s influence and relevance in the global duty-free and travel retail channels it once dominated. One of the most high-profile deals was announced today, with most of the LVMH-owned companies agreeing to sell their Greater China operations to China Travel Group Duty Free (CTG Duty Free).

The retailer also decided to abandon its ambitious shopping and entertainment infrastructure project in Hainan’s Yalong Bay, a popular duty-free province. A spokesperson told Forbes.com: “DFS has been re-evaluating our plans for Yalong Bay. With the recent sale of our Hong Kong and Macau operations, we can confirm that DFS will not move forward with the Yalong Bay project. We are grateful to Shenya Group for its partnership.” Shenya Group is a Chinese regional real estate developer.

The sales in Hong Kong and Macau follow DFS’s historic decision in March to close its Guam duty-free operations after 50 years in another groundbreaking location: Hawaii. After 63 years, the retailer is exiting the market, closing its Waikiki operations next week on Jan. 28 and the Honolulu Airport store on March 31. Its lease at Kahului Airport ends Aug. 31.

This all comes before T Galleria in New Zealand and Australia closes or withdraws interest, as well as the Fondaco dei Tedeschi in Saipan and Venice. Early last year, LVMH also placed Paris’ La Samaritaine store, arguably DFS’s most prestigious store, under a new governance structure and wrested it from DFS.

Back in China, Three Gorges Duty Free Stores, controlled by China Travel Group, which is listed on the Hong Kong and Shanghai stock exchanges, will acquire DFS’s stores in Hong Kong and Macau (excluding the City of Dreams business) and what the seller calls “intangible assets in Greater China.” These include a range of DFS brands and intellectual property dedicated to this sector of the economy.

Share purchase is part of the transaction

The market reacted positively to CTG’s duty-free acquisition; its shares closed up 6.7% on Monday, while LVMH’s shares fell 4.3%. This highlights how differently investors view CTG’s expansion and DFS’s contraction.

The deal comes with a number of conditions attached in the form of a memorandum of understanding (MOU) under which the Chinese company will further collaborate with LVMH (more on that below), while a minority stake subscription by the seller is also included in the structure.

The Miller family, another core shareholder of LVMH and DFS, will subscribe to Three Gorges Duty Free Shop’s Hong Kong shares, but the subscription amount will only account for a small part of its sale proceeds. The subscription for the newly issued shares will take place upon completion of the transaction, which is expected to be completed in approximately two months.

Billionaire Robert Miller was one of DFS’s two co-founders, the other being philanthropist Chuck Feeney, who died in 2023 and gave up his stake when the company was sold to LVMH in 1997. The business, part of LVMH’s Select Retail unit, which includes Sephora, has struggled in recent years due to post-COVID-19 travel and reduced spending by Chinese consumers, an important shopping group.

The DFS business was founded in 1960 and has been losing money in recent years. Miller’s fortune appears to be tracking DFS’s performance, peaking at $5.5 billion in 2020 and falling to $2 billion last year, according to Forbes’ real-time net worth tracker.

Three Gorges duty-free products reflect China’s global ambitions

Beijing-based Sanxia Duty Free is by far China’s largest travel retailer, with a 79% market share. The DFS deal gives the partly state-owned listed company greater clout in its international travel retail ambitions. Although Hong Kong and Macau are part of Greater China, they have higher visibility on the world stage. This is an important advantage that Three Gorges Duty Free cannot achieve only in the mainland.

Zhang Luke, executive director and president of the company, said: “This move aims to build a platform to promote Chinese fashion brands globally. We remain committed to providing domestic and foreign tourists with a high-quality travel retail experience.” He added that China Three Gorges Group will actively help implement the mainland integration strategy of the Guangdong-Hong Kong-Macao Greater Bay Area personally promoted by President Xi Jinping.

LVMH veteran Ed Brennan, who was appointed Chairman and CEO of DFS in November 2024 to streamline the business, commented: “DFS’s strong presence and operational excellence in Hong Kong and Macau is an achievement that we are very proud of. The new skills and perspectives that Sanxia Duty Free brings will enhance our experience.”

LVMH continues to be involved

The memorandum of understanding signed between China Three Gorges Group Duty Free Shop and LVMH Moët Hennessy Group aims at retail strategic cooperation, and the strategies of both parties can be consistent “with the current business model of LVMH Moët Hennessy Group’s brands.” They span fashion, drinks, hard luxury and beauty, and include brands such as Dior, Loewe, Louis Vuitton, Glenmorangie, Hennessy, Bulgari, Tag Heuer and Tiffany.

This cooperation aims to leverage the respective advantages of both parties to drive product sales, establish boutiques, and strengthen brand promotion. For LVMH, maintaining a presence in China’s duty-free ecosystem – without having to bear the operational burden of DFS – may prove to be a more effective way to achieve brand success and give it an edge over rivals.