Isle duty-free operator
plans layoff

The Paris-based retailer
is blaming the slowdown in
Japanese business

By Russ Lynch
Star-Bulletin

DFS Hawaii, which operates eight duty-free shops at Honolulu Airport and a major duty-free and retail business in Waikiki, was expected today to announce cut-backs, including some layoffs, because of the slump in Japanese tourist business.

The 1,500-employee retailer, which is $22 million in arrears on its rent to the state airport system, declined to give details but scheduled a news conference for late today.

DFS, which says its business is down about 20 percent compared with last year, would say only that it will be making some changes.

DFS Hawaii is a subsidiary of San Francisco-based DFS Group Ltd., which in turn is a subsidiary of Paris-based LVMH Moet Hennessey Louis Vuitton SA.

The headquarters in France issued a statement yesterday saying said that the whole DFS system in Asia and the Pacific is asking its 5,000 vendors to give them a two-month relief from making payments while it reorganizes.

There has been a slump in travel throughout Asia, particularly by the Japanese, and LVMH said DFS Group will be cutting its costs over the next 18 months.

A newspaper in Hong Kong said that the Duty Free Shoppers HK Ltd. subsidiary, which has 1,900 employees, will lay off 300 of them. Like DFS Hawaii, however, the Hong Kong company said it won't comment until later.

DFS Hawaii operates the duty-free concession under a contract with the state that calls for minimum rent of about $100 million a year. When the latest quarterly payment of $25.5 million came due March 1, DFS paid only $3.5 million.

Edward Brennan, DFS Hawaii president, said the company is negotiating with the state and expects to work out a payment plan.

DFS did that successfully in 1991, in the Japanese tourism slump during the Persian Gulf war. It was allowed to defer payment of $103 million, which it later paid.

Marilyn Kali, a spokeswoman for the state Department of Transportation, confirmed the shortfall in the March payment and said the state is trying to work things out with DFS.

In addition to the duty-free stores in Honolulu, DFS Hawaii has retail concessions in the Honolulu, Kona and Kahului airports. Kali said rent is current for those.