Duty Free International, tired of seeing its stock ground into the dust on Wall Street, announced yesterday that it will buy back 1 million shares of its common stock and pay its first dividend.
The Ridgefield, Conn.-based company, which has major operations in Glen Burnie, has seen its stock plunge from a high of $56.25 in January to a low of $19.75 during Tuesday's trading, largely because of slow sales at its Canadian border stores. The moves were a clear signal that management believes the stock is undervalued.
The stock closed yesterday at $21.75, up $1 from Tuesday's close.
Company Chairman David Bernstein said the buyback is "management's way of letting the shareholder know we have confidence in the future of the company." The 5-cent quarterly dividend is payable Aug. 15 to shareholders of record July 31.
Duty Free International is the leading operator of duty-free stores along the borders with Canada and Mexico. The company also operates duty-free and conventional retail stores at international airports.
Through its Glen Burnie-based division, Samuel Meisel & Co., Duty Free also supplies duty-free merchandise to foreign diplomats in the United States and to ships calling at Northeastern and some Southern ports.
Starting a dividend has been a subject of internal debate for some time, Mr. Bernstein said. He said it should make Duty Free stock more attractive to institutional holders such as pension funds, which sometimes restrict stock purchases to dividend-paying companies.
He said Duty Free, with nearly $90 million in cash, is in good shape to begin the payout.
Paul Bienstock, a retail analyst who follows the company for Moran & Associates in Greenwich, Conn., said Duty Free's moves were "definitely a positive sign." He noted that the reduction in the number of shares outstanding would allow the company to report higher earnings per share.
Duty Free's confidence-building measures come after a brutal spring and early summer that saw the company fall from its perch as one of the fastest-growing stocks of 1991.
"This has been a miserable year for us weatherwise," said Mr. Bernstein, referring to the cold, wet conditions that have dampened Canadians' urge to travel and have limited traffic through Duty Free's border stores. The problems have been compounded by a deep recession in Canada and stepped-up inspections of cars crossing the border into Canada.
After a sluggish May and June, July has brought a glimmer of hope to the company. Over the Fourth of July holiday weekend, business was "better than we have seen up to then," Mr. Bernstein said.
The company said this week that sales in its airport, diplomatic and wholesale duty-free businesses were running ahead of projections. Duty Free also said sales were improving at its stores along the Mexican border, which were acquired this spring when the company acquired UETA Inc. of San Antonio.
"It's my feeling that things have bottomed out," Mr. Bienstock said.