Duty Free International enters pact to lease 7 stores at San Juan airport

August 28, 1992|By Michael Dresser | Michael Dresser,Staff Writer

Duty Free International Inc. has gained a long-desired foothold in the Caribbean by signing an agreement with Aeroboutiques de Puerto Rico to buy lease rights for six duty-free and one newsstand-gift store at the San Juan International Airport.

The transaction, which is expected to bring $10 million in additional annual revenue to Duty Free, comes just months after the Ridgefield, Conn.-based company completed a major acquisition on the U.S.-Mexican border.

Duty Free, which has a large presence in Glen Burnie, did not announce a purchase price for the Caribbean business, but spokeswoman Dyan Cutro said "it's not a big chunk of money." The leases run for five years, with a company option for an other five years.

Paul Bienstock, an analyst with Moran & Associates in Greenwich, Conn., said the deal was "a logical extension" of the company's acquisition in March of UETA Inc. In that deal, Duty Free added retail, wholesale and ship-supply operations in the port of Miami, as well as about 30 duty-free stores along the Mexican border.

Ms. Cutro, the company's director of investor relations, said Duty Free has long been interested in establishing a presence in the Caribbean and would continue to explore opportunities in the region.

In addition to the Puerto Rico deal, Duty Free announced yesterday that it has signed a letter of intent to operate a 1,200-square-foot Athlete's Foot store in the new Midfield Terminal Complex at the Greater Pittsburgh International Airport.

The deal, which marks Duty Free's first venture as a franchisee of a retail chain, gives Duty Free an exclusive role in the expansion of the Athlete's Foot concept in other U.S. airports, Ms. Cutro said.

The two deals are part of Duty Free's increased focus on expanding its airport division, Ms. Cutro said.

"There's not too much left on the border," Ms. Cutro said. "There's a lot more opportunity going forward with airports."

Duty Free's second-quarter earnings, also released yesterday, pointed up some of the reasons for the company's emphasis on airport stores.

The company reported flat earnings per share for the quarter as plunging sales at its Canadian border stores canceled out healthy gains at its airport stores and in its diplomatic and wholesale division, which is based in Glen Burnie.

Net earnings for the quarter that ended July 31 came to $9.9 million, or 35 cents a share, up 6.5 percent from $9.3 million, or 35 cents a share, in the same period last year.

Sales increased 7 percent to $95.5 million from $89.2 million in the second quarter a year ago. The figures include UETA's results from last year for purposes of comparison.

Without UETA, Duty Free reported net income for the second quarter of 1991 of $7.4 million.

The company fell short of its typical double-digit gains because sales in its northern border division stores fell 7 percent in the second quarter, skidding to $34.7 million compared with $37.5 million in the same quarter last year.

Mr. Bienstock said the drop was greater than the 4 percent decrease he had expected but well within the range forecast by company executives. Duty Free had projected that sales would be flat to 10 percent down because of cold, rainy weather along the northern border and a lingering recession in Canada.

The weather has improved in August and sales appear to turning up, said Mr. Bienstock. "My own sense is the worst is behind us," he said.

(

Three months ended 7/31/92

......Revenue... .... .... Net.... .... .... Share

'92.. 95,514,000... .... 9,931,000... ... 0.35

'91.. 89,215,000... .... 9,323,000... ... 0.35

% change +7.1... ... ... ... +6.5... ... .. ... 0.0

Year ended 12/31/91

......Revenue... .... .... Net.... .... .... Share

'92.. 172,697,000... ... 11,759,000... .. 0.41

'91.. 157,694,000... ... 14,025,000... .. 0.53

% change +9.5... ... ... .. -16.2... ... ... -22.6

* Earnings per share for the six months that ended July 31, 1992, was 57 cents before including a charge for merger-related expenses.

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