Duty Free International Inc. is proving to be a stock for investors who like roller coaster rides.
The Ridgefield, Conn.-based company's stock took a big hit on heavy volume Monday after reports surfaced that the Mexican government was tightening restrictions on the importation of duty-free merchandise.
Monday's $2.50-a-share tumble, representing 8.5 percent of Duty Free's stock price, was deja vu for company officials. Duty Free saw its stock drop 13 percent one day in February when Canada floated a proposal to raise taxes on Canadian tobacco products brought back into the country -- a proposal the government later dropped.
Because of its extensive chain of duty-free shops along the borders, the company is exposed to changes in Canadian or Mexican customs policies.
Duty Free, which has its back-office operations and one of its divisions based in Glen Burnie, issued a statement yesterday morning reassuring investors that the Mexican government's action "should not have an impact" on sales at the company's border stores. After the statement, the company's stock recovered some lost ground yesterday, gaining $1, to close at $27.75.
Dyan Cutro, Duty Free's director of investor relations, said yesterday that the stock's fall came after a Morgan Stanley analyst said investors might want to take a wait-and-see posture toward the stock after a negative television report by USA Today columnist Dan Dorfman.
In a broadcast Monday, Mr. Dorfman cited a privately circulated report by David W. Tice & Associates of Dallas describing the Mexican government's actions and predicting the stock would fall to about $15 within 12 months. Mr. Dorfman said yester
day that he also passed on unconfirmed reports that giant Wal-Mart Stores Inc. might enter the duty-free business.
According to Ms. Cutro, the Mexican government announced recently that it intended to enforce a blanket $50-per-day, per-person limit on the amount of merchandise a Mexican national could bring back across the border.
Previously, she said, the rule was $350 a day for Mexicans living more than 50 miles from the border and $50 for Mexicans living closer to the border -- a distinction that was almost impossible to enforce.
Ms. Cutro said the Mexican government subsequently announced that all Mexicans would be allowed one day a month when they could bring back $350 per person, with the limit staying at $50 for the other days.
How the government would enforce such a rule is not clear, Ms. Cutro said.
Paul Bienstock, a retail analyst with Moran & Associates in Greenwich, Conn., dismissed the Wal-Mart report as "ludicrous," citing the difficult bonding requirements and federal controls faced by any company entering the duty-free business. A Wal-Mart spokeswoman, Sandy Brummett, said she knew nothing about any such venture.