FORM 10-Q
                                                                    Page 1 of 12


                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    Form 10-Q

                Quarterly Report Under Section 13 or 15(d) of the
                         Securities Exchange Act of 1934


For the quarter ended October 27, 1996       Commission File No. 1-10952


                          DUTY FREE INTERNATIONAL, INC.
--------------------------------------------------------------------------------
             (Exact name of Registrant as specified in its charter)

            Maryland                                 52-1292246
-------------------------------                  -------------------
(State or other jurisdiction of                  (I.R.S. Employer
incorporation or organization)                   Identification No.)


                   63 Copps Hill Road, Ridgefield, Connecticut
                   -------------------------------------------
                    (Address of principal executive offices)

                                      06877
                                   ----------
                                   (Zip Code)

Registrant's telephone number, including area code: 203-431-6057

Indicate by checkmark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.

                             YES X   NO
                                ---

At November 27, 1996, 27,291,775 shares of $.01 par value common stock of the
registrant were outstanding.


                           Exhibit on Page 12
                              Page 1 of 12



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                                                                       FORM 10-Q
                                                                    Page 2 of 12


                          DUTY FREE INTERNATIONAL, INC.
                                October 27, 1996


                                      INDEX


Part I.  Financial Information                                   Page

Item 1.  Financial Statements

     Consolidated Balance Sheets as of                              3
     October 27, 1996 (unaudited) and
     January 28, 1996

     Consolidated Statements of Earnings                            4
     (unaudited) for the three and nine months
     ended October 27, 1996 and October 29, 1995

     Consolidated Statement of Stockholders'                        5
     Equity (unaudited) for the nine months
     ended October 27, 1996

     Consolidated Statements of Cash Flows                          6
     (unaudited) for the nine months
     ended October 27, 1996 and October 29, 1995

     Notes to Consolidated Financial                                7
     Statements (unaudited)

Item 2.  Management's Discussion and Analysis                  8 - 11
         of Financial Condition and Results of
         Operations


Part II.  Other Information

Item 6.  Exhibits and Reports on Form 8-K                          11

Signature                                                          11


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                                                                       FORM 10-Q
                                                                    Page 3 of 12

PART  I.   FINANCIAL INFORMATION

Item 1.    Financial Statements

                 DUTY FREE INTERNATIONAL, INC. AND SUBSIDIARIES
                           Consolidated Balance Sheets
                                 (in thousands)

                                                October 27,  January 28,
                                                  1996          1996
                                                -----------  ----------- 
                                               (unaudited)    (note 1)
     Assets

Current assets:
   Cash and cash equivalents                   $  38,677       $ 36,228
   Short-term investments (fair value of
   $10,069 and $12,784, respectively)             10,073         12,747
   Receivables:
    Trade receivables, less allowance
    for doubtful accounts of $738 and
    $735, respectively                            22,146         20,106
    Other                                          9,540          7,901
                                               ---------       --------
                                                  31,686         28,007
                                               ---------       --------
   Merchandise inventories                       132,431         90,472
   Prepaid expenses and other current assets       9,225          9,825
                                               ---------       --------
      Total current assets                       222,092        177,279
Long-term investments (fair value of
   $11,525 and $10,530, respectively)             11,533         10,550
Property and equipment, net                       95,811         92,413
Excess of cost over net assets of
   subsidiaries acquired, net                     64,723         65,731
Other intangible assets, net                      22,128         24,246
Other assets, net                                 18,867         20,489
                                               ---------       --------
                                               $ 435,154       $390,708
                                               =========       ========

     Liabilities and Stockholders' Equity
Current liabilities:
   Current maturities of long-term debt        $   1,093       $  2,053
   Accounts payable                               45,555         25,193
   Other current liabilities                      41,675         28,742
                                               ---------       --------
      Total current liabilities                   88,323         55,988
Long-term debt, excluding current
   maturities                                    117,753        118,418
Other liabilities                                  5,672          3,820
                                               ---------       --------
      Total liabilities                          211,748        178,226
                                               ---------       --------
Stockholders' equity:
   Common stock, par value $.01 per
    share. Authorized 75,000,000
    shares; issued and outstanding
    27,288,707 shares and 27,270,124
    shares, respectively                             273            273
   Additional paid-in capital                     80,334         80,302
   Foreign currency translation adjustments           61            ---
   Retained earnings                             142,738        131,907
                                               ---------       --------
      Total stockholders' equity                 223,406        212,482
                                               ---------       --------
                                               $ 435,154       $390,708
                                               =========       ========


    See accompanying notes to the consolidated financial statements.






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                                                                       FORM 10-Q
                                                                    Page 4 of 12

                 DUTY FREE INTERNATIONAL, INC. AND SUBSIDIARIES
                       Consolidated Statements of Earnings
                                   (unaudited)


                               Three Months Ended          Nine Months Ended
                            ------------------------    -----------------------
                            October 27,  October 29,    October 27,  October 29,
                                1996         1995          1996         1995
                            -----------  -----------    -----------   ---------
                                  (in thousands, except earnings per share)

Net Sales                    $ 158,662    $ 145,181       $ 417,395    $ 384,888
Cost of sales                   87,457       83,083         232,413      220,288
                             ----------   ----------      ----------   ---------
  Gross profit                  71,205       62,098         184,982      164,600

Advertising, storage and
  other operating income         1,010        1,065           2,961        3,466
                             ----------   ----------      ----------   ---------
                                72,215       63,163         187,943      168,066

Selling, general and
  administrative expenses       58,871       52,630         158,930      145,280
                             ----------   ----------      ----------   ---------

  Operating income              13,344       10,533          29,013       22,786

Other income (expense):
  Interest income                  552          649           1,751        1,891
  Interest expense              (2,107)      (2,175)         (6,349)     (6,526)
  Other, net                       177           70             554          421
                             ----------   ----------      ----------   ---------
                                (1,378)      (1,456)         (4,044)     (4,214)
                             ----------   ----------      ----------   ---------

Earnings before
  income taxes                  11,966        9,077          24,969       18,572

Income taxes                     4,427        3,358           9,239        6,871
                             ----------   ----------      ----------   ---------

  Net earnings               $   7,539    $   5,719       $  15,730    $  11,701
                             ==========   ==========      ==========   =========

Earnings per share           $    0.28    $    0.21       $    0.58    $    0.43
                             ==========   ==========      ==========   =========

Weighted average number
  of shares outstanding         27,285       27,251          27,276       27,246
                             ==========   ==========      ==========   =========



        See accompanying notes to the consolidated financial statements.



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                                                                       FORM 10-Q
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                   DUTY FREE INTERNATIONAL, INC. AND SUBSIDIARIES
                   Consolidated Statement of Stockholders' Equity
                       Nine Months Ended October 27, 1996
                            (in thousands, unaudited)

<TABLE>
<CAPTION>
                                                 Foreign
                                     Additional  currency                 Total
                     Common stock     paid-in    translation  Retained stockholders'
                    ---------------
                    Shares   Amount   capital    adjustments  earnings    equity
                    ------   ------   -------    -----------  --------    ------

<S>                <C>       <C>      <C>       <C>           <C>       <C>

Balance at
 January 28, 1996   27,270    $273    $80,302     $     --    $131,907   $212,482

Dividends
 ($0.18 per share)      --      --         --           --      (4,899)    (4,899)

Change in foreign
 currency translation
 adjustments            --      --         --           61          --         61

Other                   (4)     --       (160)          --          --       (160)

Exercise of common
 stock options          23      --        192           --          --        192

Net earnings            --      --         --           --      15,730     15,730
                    ------    ----    -------     --------    --------   --------

Balance at
October 27, 1996    27,289    $273    $80,334     $     61    $142,738   $223,406
                    ======    ====    =======     ========    ========   ========

</TABLE>

        See accompanying notes to the consolidated financial statements.




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                                                                       FORM 10-Q
                                                                    Page 6 of 12


                 DUTY FREE INTERNATIONAL, INC. AND SUBSIDIARIES
                      Consolidated Statements of Cash Flows
                                   (unaudited)

                                                  Nine Months Ended
                                                -----------------------
                                                October 27,  October 29,
                                                   1996         1995
                                                -----------  -----------
                                                              (note 1)
                                                    (in thousands)

Cash flows from operating activities:
  Net earnings                                  $ 15,730     $ 11,701
  Adjustments to reconcile net earnings
   to net cash provided by operating
   activities:
   Depreciation and amortization of
    property and equipment                         6,488        6,107
   Other amortization                              4,611        4,291
   Minority partners' interest in
    consolidated partnerships' income              1,978          808
   Provision for deferred income taxes               825        2,221
  Changes in operating assets and liabilities:
     Accounts receivable                          (4,130)        (818)
     Merchandise inventories                     (40,149)      (7,111)
     Prepaid expenses and other current
      assets                                        (967)         983
     Accrued restructuring expenses                 (885)      (2,174)
     Accounts payable                             20,362       13,949
     Income tax payable                            3,876        1,411
     Other current liabilities                     9,989        4,235
   Other                                            (749)         (16)
                                                ---------    ---------
    Net cash provided by operating
     activities                                   16,979       35,587
                                                ---------    --------

Cash flows from investing activities:
  Purchases of investments                        (8,608)     (24,858)
  Maturities of investments                       10,299       29,535
  Additions to property and equipment             (9,780)      (8,499)
  Acquisitions of businesses,
   net of cash acquired                              ---       (5,050)
  Other                                             (446)        (852)
                                                ---------    ---------
    Net cash used in investing
     activities                                   (8,535)      (9,724)
                                                ---------    ---------

Cash flows from financing activities:
  Payment of borrowings                           (2,266)      (3,460)
  Dividends paid                                  (4,636)      (4,087)
  Other                                              907         (181)
                                                ---------    ---------
    Net cash used in financing
     activities                                   (5,995)      (7,728)
                                                ---------    ---------
Net increase in cash and
 cash equivalents                                  2,449       18,135
Cash and cash equivalents at beginning
 of period                                        36,228       34,398
                                                ---------    --------
Cash and cash equivalents at end of
 period                                         $ 38,677     $ 52,533
                                                =========    ========


        See accompanying notes to the consolidated financial statements.




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                                                                       FORM 10-Q
                                                                    Page 7 of 12


                 DUTY FREE INTERNATIONAL, INC. AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements
                                   (unaudited)


(1)  Consolidated Financial Statements

     The consolidated financial statements included herein do not include all
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles. For
further information, such as the significant accounting policies followed by the
Company, refer to the notes to consolidated financial statements set forth in
the Company's annual report for the year ended January 28, 1996.

     In the opinion of management, the consolidated financial statements include
all necessary adjustments (consisting of normal recurring accruals) for a fair
presentation of the financial position, results of operations and cash flows for
the interim periods presented.

     The results of operations for the periods ended October 27, 1996 are not
necessarily indicative of the operating results to be expected for the full
year.

     The balance sheet at January 28, 1996 has been derived from the audited
financial statements of the Company at that date.

       Certain amounts for the periods ended October 29, 1995 and January 28,
1996 have been reclassified to conform to the presentation for the period ended
October 27, 1996.

(2)  Principles of Consolidation

     The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiaries. Long-term investments in affiliates in which
the Company does not have a majority interest or control are accounted for by
the equity method of accounting. All significant intercompany balances and
transactions have been eliminated in consolidation.

(3)  Earnings Per Share

     Earnings per share are based on the weighted average number of shares of
common stock outstanding during each period.

(4)  Foreign Exchange Forward Contracts

     The only financial derivatives used by the Company are foreign exchange
forward contracts. The Company had approximately $14,862,000 of foreign exchange
forward contracts outstanding at October 27, 1996 to purchase British pounds,
Swiss Francs, German Marks, and French Francs. The contracts outstanding at
October 27, 1996 mature at various dates in fiscal 1997. The fair values of
these contracts were $15,153,000 as of October 27, 1996. Fair values were
estimated by obtaining quotes from banks assuming all contracts were purchased
on October 27, 1996.



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                                                                      FORM 10-Q
                                                                    Page 8 of 12

PART I.  FINANCIAL INFORMATION  (CONTINUED)

Item 2.  Management's Discussion and Analysis of Financial Condition and
         Results of Operations.

RESULTS OF OPERATIONS

     Net earnings for the three months ended October 27, 1996 were $7,539,000,
or $0.28 per share, an increase of $1,820,000 or 32% from $5,719,000, or $0.21
per share, for the three months ended October 29, 1995. Net earnings for the
nine months ended October 27, 1996 were $15,730,000, or $0.58 per share, an
increase of $4,029,000 or 34% from $11,701,000, or $0.43 per share, for the nine
months ended October 29, 1995. The increases for both periods were due primarily
to increases in the Southern Border and Airport Division's net earnings. The
Southern Border Division's net earnings increased for both periods due to sales
increases of 12.5% and 13.3% for the three and nine months ended October 27,
1996, respectively. The Southern Border Division's net sales increases were in
comparison to the Division's fiscal 1996 results which were significantly
affected by the Mexican peso devaluation in December 1994 and its substantial
negative affect on the Mexican economy during fiscal 1996. The Division's
selling, general and administrative expenses increased by only 3.4% and 2.1% for
the three and nine months ended October 27,1996, respectively when compared to
the same periods in the prior year. The Airport Division's net earnings
increased significantly for both periods due primarily to a decrease in payroll
and related expenses, as a percent of sales, and new airport locations in New
York, Chicago, Philadelphia, and Puerto Rico.

     Below are explanations of significant variances by income statement line
item.


Net Sales

    The following table sets forth, for the periods indicated, the net sales and
the percentage of total net sales for each of the Company's divisions and the
period to period change in such sales:

                        Three Months Ended                  
               --------------------------------------       Increase/(Decrease)
               (in thousands, except for percentages)       Three Months Ended
Divisional                                                  October 27, 1996 vs.
Net Sales       October 27, 1996       October 29, 1995      October 29, 1995
-------------  -------------------    -------------------   -----------------

Border:
  Southern     $ 31,828   20.1%      $ 28,279   19.5%      $  3,549      12.5 %
  Northern       26,885   16.9%        26,532   18.3%           353       1.3 %

Inflight         53,069   33.4%        48,008   33.0%         5,061      10.5 %

Airport          34,103   21.5%        26,885   18.5%         7,218      26.8 %

Diplomatic
and Wholesale    12,777    8.1%        15,477   10.7%        (2,700)    (17.4)%
               --------  ------      --------  ------       --------

               $158,662  100.0%      $145,181  100.0%      $ 13,481       9.3 %
               ========  ======      ========  ======      =========


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                                                                       FORM 10-Q
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                         Nine Months Ended               
               --------------------------------------     Increase/(Decrease) 
               (in thousands, except for percentages)      Nine Months Ended  
Divisional                                                October 27, 1996 vs.
Net Sales       October 27, 1996      October 29, 1995      October 29, 1995   
-------------  -------------------   -------------------   -----------------

Border:
  Southern     $ 80,746   19.3%      $ 71,255   18.5%      $  9,491      13.3 %
  Northern       66,819   16.0%        63,516   16.5%         3,303       5.2 %

Inflight        140,847   33.7%       130,747   34.0%        10,100       7.7 %

Airport          90,915   21.8%        76,475   19.9%        14,440      18.9 %

Diplomatic
and Wholesale    38,068    9.2%        42,895   11.1%        (4,827)    (11.3)%
               --------  ------      --------  ------      ---------

               $417,395  100.0%      $384,888  100.0%      $ 32,507       8.4 %
               ========  ======      ========  ======      =========




The Southern Border Division's net sales increased by 12.5% and 13.3% for the
three and nine months ended October 27, 1996, respectively, when compared to the
same periods in the prior year. The increases were due primarily to the
significant negative affects of the peso devaluation in December 1994 on the
Division's fiscal 1996 results. The Northern Border Division's net sales
increased by 1.3% and 5.2% for the three and nine months ended October 27, 1996
respectively. The increases were due primarily to the purchase of two stores in
July 1995 which increased the Division's sales for the first half of the current
year versus the same period in the prior year, and an increase in the average
amount spent per transaction by customers for both periods in the current year
resulting from the Division's sales training programs and other marketing
efforts. The above was partially offset by the continued decrease in Canadian
traffic across the United States/Canada border and a decrease in retail and gas
sales. The Inflight Division's net sales increased by 10.5% and 7.7% for the
three and nine months ended October 27, 1996, respectively, due primarily to
sales from new airline concession contracts (Air Canada, Canadian
International). The above was partially offset by a decrease in wholesale sales
to airlines, including Air Canada and Canadian International. Air Canada and
Canadian International were wholesale customers of the Inflight Division before
Inflight was awarded their concession contracts. The Airport Division's net
sales increased by 26.8% and 18.9% for the three and nine months ended October
27, 1996, respectively, due primarily to new store openings in fiscal 1996 and
1997. Diplomatic and Wholesale Division net sales, excluding net sales of the
two locations sold in fiscal 1996 as part of the restructuring plan, decreased
by 8.6% and 0.8% for the three and nine months ended October 27, 1996,
respectively. The decreases were due primarily to the Company intentionally
decreasing low margin wholesale sales which was partially offset by an increase
in sales to cruise ships.

Cost of Sales and Gross Profit


     Gross profit, as a percentage of net sales, increased to 44.9% for the
three months ended October 27, 1996 from 42.8% for the same period in the prior
year. Gross profit, as a percentage of net sales, increased to 44.3% for the
nine months ended October 27, 1996 from 42.8% for the same period in the prior
year. The increases for both periods were due primarily to an increase in the
Airport, Inflight and Northern Border Division's duty free sales, all of which
have gross profit margins higher than the Company's average gross profit margin,
and a


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                                                                       FORM 10-Q
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decrease in lower margin wholesale, gas and Northern Border retail sales, all of
which have gross profit margins lower than the Company's average gross profit
margin. The above was partially offset by an increase in the Southern Border
Division's sales as a percentage of the Company's total sales. The Southern
Border Division has gross profit margins that are lower than the Company's
average gross profit margin.

Advertising, Storage and Other Operating Income

     Advertising, storage and other operating income decreased by $55,000 and
$505,000 for the three and nine months ended October 27, 1996, respectively,
when compared to the same periods in the prior year. The decreases were due
primarily to a reduction in certain vendor advertising programs, and a decrease
in storage income as a result of the Company reducing the warehouse space
allocated to storing the merchandise of certain suppliers to the duty free
industry.

Selling, General, and Administrative Expenses


     Selling, general and administrative expenses, as a percentage of net sales,
increased to 37.1% for the three months ended October 27, 1996 from 36.3% for
the same period in the prior year. Selling, general and administrative expenses,
as a percentage of net sales, increased to 38.1% for the nine month period ended
October 27, 1996 from 37.7% for the same period in the prior year. A decrease in
payroll and related expenses, as a percentage of net sales, during the current
year was offset by an increase in commission expenses paid to airlines resulting
from an increase in the Inflight Division's concession sales, an increase in
base rent and rent based on sales due to store openings in fiscal 1996 and
fiscal 1997, and an increase in the Northern and Southern Border Division's
advertising and promotion expenses.


LIQUIDITY AND CAPITAL RESOURCES

     Net cash provided by operating activities was $16,979,000 for the nine
months ended October 27, 1996. The Company had $60,283,000 of cash and short-and
long-term investments as of October 27, 1996. Working capital was $133,769,000
as of October 27, 1996. There were no borrowings under the Company's $75,000,000
revolving line of credit facility as of October 27, 1996. The Company believes
its existing funds, cash provided by operating activities and available
borrowings will be sufficient to meet its current liquidity and capital
requirements.

REGULATION AND ECONOMIC FACTORS AFFECTING THE DUTY FREE INDUSTRY

    The Company's sales and gross profit margins are affected by factors
specifically related to the duty free industry. Most countries have allowances
on the import of duty free goods. Decreases in the duty free allowances of
foreign countries or stricter eligibility requirements for duty free purchases,
as well as decreases in tax and duty rates imposed by foreign jurisdictions
could have a negative effect on the Company's sales and gross profit margins
(particularly Canada and Mexico). Conversely, increases could have a positive
effect on the Company's sales and gross profit.

    The principal customers of the Company are residents of foreign countries
whose purchases of duty free merchandise may be affected by trends in the
economies of foreign countries and changes in the value of the U.S. dollar
relative to their own currencies. Any significant increase in the value of the
U.S. dollar relative to the currencies of foreign countries, particularly
Canada, Mexico and Japan, could have an adverse impact on the number of
travelers visiting the United States and


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                                                                       FORM 10-Q
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the dollar amount of duty free purchases made by them from the Company. A
significant increase in gasoline prices or a shortage of fuel may also reduce
the number of international travelers and thereby adversely affect the Company's
sales. In addition, the Company imports a significant portion of its products
from Western Europe and Canada at prices negotiated either in U.S. dollars or
foreign currencies. As a result, the Company's costs are affected by
fluctuations in the value of the U.S. dollar in relation to certain, major
Western European currencies and the Canadian dollar. A decrease in the
purchasing power of the U.S. dollar relative to other currencies causes a
corresponding increase in the purchase price of products. The Company enters
into foreign exchange forward contracts as a hedge against a portion of its
exposure to currency fluctuations on commitments to purchase merchandise.


PART II.  OTHER INFORMATION


Item 6.   Exhibits and Reports on Form 8-K

     (a)  Exhibits:

          27.1 Financial Data Schedule.

     (b)  The Company did not file a Current Report on Form 8-K during the three
          months ended October 27, 1996.




                               SIGNATURE


Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.


                                          DUTY FREE INTERNATIONAL, INC.




Date:  December 6, 1996                      /s/  Gerald F. Egan
      -------------------                 ----------------------
                                          Gerald F. Egan
                                          Vice President-Finance and
                                          Chief Financial Officer