Slow sales weigh down Duty Free stock Recession takes toll at Canadian border

December 23, 1992|By David Conn | David Conn,Staff Writer

Duty Free International Inc., until recently one of Wall Street' darlings, was jilted once again yesterday, as news of sluggish sales along the Canadian border drove the company's stock price down 17 percent.

Duty Free, which is based in Ridgefield, Conn., and has a division headquarters and major employment center in Glen Burnie, said poor weather and the Canadian recession have combined to cut sales to about 30 percent below expectations in the fourth quarter, which will end Jan. 31.

If current trends continue, Duty Free said in a statement, fourth-quarter per-share earnings will be 18 cents to 22 cents, compared with 20 cents a year ago, and $1.19 to $1.23 per share for the full year.

By contrast, an average of nine stock analysts' estimates, compiled by Zacks Investment Research, predicted that Duty Free would earn 29 cents a share in the fourth quarter, and $1.28 for the year.

The company's stock, as high as $56.25 less than a year ago, closed at $20 yesterday, down $4.125 a share in heavy trading on the New York Stock Exchange. Trading was interrupted at one point, as the price dipped as low as $17.75, below its 52-week low of $19.75.

Duty Free operates 158 stores, including those along the Mexican and Canadian borders. Other divisions handle sales to diplomats and to travelers at airports.

"It was clear after this past weekend, with the pre-Christmas sales not up to the expected levels, that we had to alert the Street," said Dyan Cutro, director of investor relations.

"The company believes that this quarter's sales level reflects the continued deterioration in Canadian employment levels, weakness in the Canadian dollar and a major storm affecting travel in the northeastern United States, resulting in fewer Canadian travelers eligible to purchase duty-free merchandise," the company said in its statement.

Chief Financial Officer Gerald Egan said at an Alex. Brown seminar last month that poor weather and the recession would reduce sales. A series of scares about international trading rights, some real and some perceived, have lopped off more than 64 percent of the value of the stock's high point.

In January, the stock dropped 13 percent in a day after Canada proposed to raise taxes on Canadian tobacco products brought back into the country -- a proposal that later was dropped. And earlier this month, the shares fell 8.5 percent after reports surfaced that the Mexican government was tightening restrictions on the importation of duty-free merchandise.

But Ms. Cutro said the company's airport division is strong. Duty Free is still in the running to gain entry to the Denver airport under construction, she said, and the seven stores that opened in Pittsburgh's airport last month are doing well.

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