Duty-free chain is on cutting edge of border business


February 24, 1992|By Michael Dresser

David H. Bernstein got his start in the duty-free business at the age of 15, pushing a broom in the warehouse of Samuel Meisel & Co. on Baltimore's waterfront.

He must have profited from the experience, because he is now chairman of a company that in less than a decade has swept to a dominant position in its lucrative niche, a listing on the New York Stock Exchange and one of the fastest growth records in the U.S. retail industry.

By capitalizing on a long-term trend of increased travel by foreigners in the United States, Duty Free International has posted astonishing gains in sales and earnings in recent years. Over the past two years, DFI's sales and earnings per share have almost doubled. Sales of $55 million in 1989 soared to $105 million in fiscal 1991. Analysts expect the company to ring up $185 million in fiscal 1992.

Beth Cotner, an analyst with Kemper Financial Services who made DFI her choice in a Wall Street Journal stock-picking feature, said DFI is one of only three companies out of 200 her company tracks that has exceeded analysts' earnings projections for nine straight quarters.

Such achievements do not go unnoticed. Since it went public in 1989, DFI's stock has appreciated more than 500 percent, even taking into account a recent slide that has sheared more than 20 percent off its peak in recent weeks.

While DFI's headquarters are in Ridgefield, Conn., the company has roots in Baltimore. Samuel Meisel & Co., now one of DFI's three divisions, has been a fixture on the waterfront here for about 75 years, providing duty-free merchandise to ships in Atlantic ports and diplomats in Washington and New York. Now based in Glen Burnie, the Meisel company is the "guts" of DFI's operations, said Mr. Bernstein.

Mr. Bernstein, a co-founder of DFI, is a lifelong Baltimorean who still bleeds Colts blue and once told his wife he'd like to be buried under the 50-yard line at Memorial Stadium. "I've never rested a day since the Colts left this town," he said.

While DFI's chief executive officer works in Connecticut, Mr. Bernstein keeps his office at Samuel Meisel, where he has worked since his lawyer father arranged the job with his longtime clients, the Meisel bothers.

Mr. Bernstein continued to work there during summers while he attended Johns Hopkins University, and in 1958 joined Meisel full time. In 1972, the Meisels chose him to become president of the company they founded.

Mr. Bernstein said DFI was born out of a friendship. In the '70s, he met John A. Couri, who owned IDF Services, a company that operated airport duty-free shops, at a meeting of the international trade organization for duty-free merchants. The two became friends and began to talk about eventually working together.

Their opportunity came in 1983, when a small chain of duty-free shops on the Canadian border came up for sale. Mr. Bernstein, who had supplied the shops as a wholesaler, got on the phone to Mr. Couri.

To acquire the chain, the two men formed Duty Free International, with financing from Germany's Gebr. Heinemann, the world's oldest duty-free company. Mr. Bernstein became chairman and Mr. Couri was named president and chief executive officer, and DFI acquired their original companies.

Since then, DFI has evolved into a company like none other in the United States. It operates three divisions, each of which specializes in a sub-niche of duty-free sales.

The border division, representing almost half of total sales, operates 49 Ammex duty-free and nine retail gift shops stretching along the Canadian border -- from Maine to Blaine, Wash., as the company likes to point out. Based at Ridgefield, Ammex accounted for $51.7 million in 1991 sales.

The New York-based airport division operates 16 duty-free and 14 gift shops at seven international airports, including Baltimore-Washington. These stores, trading as Fenton Hill American Limited, account for a quarter of DFI's business, with $25.3 million in 1991 sales.

The diplomatic and wholesale division, which rang up $28 million in 1991 sales, operates under the Samuel Meisel name out of its warehouse-office complex in the Baymeadow Industrial Park in northern Anne Arundel County.

From all over the world, containers of duty-free liquor, tobacco and perfume flow into Glen Burnie, where more than 100 DFI employees complete the extensive paperwork required by the U.S. Customs Service and ship the merchandise. From there, trucks fan out to the Canadian border, East Coast airports, major ports and Washington embassies.

All three divisions have shown steady growth in recent years, but the most impressive progress has come on the northern border, where Canada's high taxes have made DFI's Ammex store a popular stop for vacationing Canadians and visiting Americans.

And no wonder. A bottle of perfume that sells for $50 in Canada might run $30 at Ammex. A bottle of scotch that costs $50 in a government-operated Ontario store comes in around $15 at the duty-free shop.

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