Inside DFS’s China retreat and what LVMH gains from letting go

LVMH’s travel retail arm DFS has sold its business in Hong Kong and Macau, as well as its intangible assets in Greater China, to China Tourism Group Duty Free (CTG Duty Free) for an undisclosed sum. 

The transaction brings to an end DFS’s direct travel retail presence in two of Asia’s most historically important luxury duty-free markets. DFS said it will continue to operate its other luxury travel retail operations worldwide. DFS is currently owned by LVMH and DFS’s co-founder, Robert Miller.

Following the announcement, CTG Duty Free’s stock was up 6.7 per cent, while LVMH’s fell by 4.3 per cent. CTG Duty Free’s market share in China has now reached approximately 79 per cent, further consolidating its dominance in the sector.

Structural drag in the former crown jewels

For decades, Hong Kong and Macau were central to DFS’s growth story. Its downtown Galleria stores and airport concessions thrived on Chinese outbound tourism, gifting culture and the steady expansion of premium consumption. At their peak, these markets were among DFS’s most profitable, emblematic of the group’s global reach and influence in luxury travel retail.

That equation has since broken down.

In recent years, the DFS business has been loss-making. While LVMH’s Selective Retailing division, which includes DFS and Sephora, posted 6 per cent year-on-year growth in 2024 to €30.6 billion (US$32.7 billion), that performance was overwhelmingly driven by Sephora. DFS, by contrast, has lagged, particularly in Hong Kong and Macau. 

LVMH has acknowledged incremental progress. In its latest results, the group said DFS recorded improved revenue trends in the third quarter, notably in Macau and Hong Kong, with cost-cutting and operational streamlining beginning to show results. But those gains have not translated into a compelling long-term case for retaining full ownership of capital-intensive travel retail assets in Greater China.

Hawaii closes, Hainan abandoned

The sale of the Hong Kong and Macau business follows a broader retrenchment. Earlier this month, DFS confirmed it would exit its long-standing downtown and airport operations in Hawaii. The company also withdrew from Oceania last September, shuttering all locations in Sydney, Auckland and Queenstown.

Meanwhile, DFS abandoned plans for an ambitious shopping and entertainment complex in Yalong Bay, Hainan, which was once expected to be one of the key moves for its China revival. 

Taken together, the exits from Oceania, Hawaii, and now Greater China point to a deliberate global repositioning in which DFS is retreating to a more selective footprint, aligned with LVMH’s broader emphasis on capital discipline and brand-led growth.

Control gives way to access

For CTG Duty Free, which operates nearly 200 duty-free stores across more than 100 cities worldwide, the acquisition strengthens an already dominant position. Absorbing DFS’s Hong Kong and Macau assets extends its reach deeper into the Greater Bay Area, reinforcing its role as the primary gateway for luxury consumption within China’s tightly regulated duty-free system.

Luke Chang, executive director and president of CTG Duty-Free, framed the deal as part of a wider ambition to accelerate the group’s international expansion. 

“This move will further expand CTG Duty-Free’s service network across the Greater Bay Area, aiming to build a platform for promoting China-chic brands globally and establish an international business mid-platform,” he added. 

Alongside the asset sale, LVMH and the Miller family will participate in a capital increase of CTG Duty-Free by subscribing to newly issued H-shares in Hong Kong. The investment represents a small portion of the sale proceeds, but symbolically, it keeps LVMH inside China’s duty-free system without the operational burden.

More importantly, both sides have signed a memorandum of understanding for strategic retail cooperation aligned with the business models of LVMH’s Maisons. The scope is broad, spanning fashion, wines and spirits, watches and jewellery, and beauty, and covering brands such as Dior, Louis Vuitton, Bulgari and Tiffany. The partnership aims to support product sales, boutique development, brand promotion and customer experience initiatives across Greater China.

In effect, LVMH is choosing access over control.

“This whole operation underscores our confidence in the long-term potential of the Chinese market,” Michael Schriver, president of LVMH for North Asia, said in a statement. 

The acquisition is expected to close in around two months.

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