Pressure grows in Hawaii as duty-free falls 25%

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Pressure is mounting on DFS Group's duty-free operation in Hawaii, following the news that sales fell 25% to $172.5m in 2001.

The company, which under its latest five-year concession guarantees $60m a year to the State Department of Transportation, is struggling to meet its terms in Hawaii and some locations on the US West Coast. Parent company LVMH has taken out a provision of $675m against losses incurred by DFS and fellow LVMH subsidiary Sephora for the coming year. The group has already announced a radical restructure of its business, and LVMH chairman Bernard Arnault has declared its retail operations "non-core".

Honolulu airport authority the State Department of Transportation told TRW: "Immediately after September 11, international passenger numbers dropped to 50% of 2000 figures. By the end of 2001, they had climbed back to about 70% of the previous year's figures." International passengers numbered 4.2m in 2001. Gross sales for the in-bond concession were $172.5m, down 25% on 2000.

Investment in a new main duty-free shop has been put on hold. Plans were made to double duty-free space to 10,000sq ft (930sq m) in one pivotal airport location, but this has been held back. "The scope of the project and timetable are now uncertain," said the airport.

DFS has supported calls for a new bill in the Hawaii state legislature that would allow operators to walk away from contracts without penalty in times of crisis.