P. LEINER REBOUNDS WITH THREE-POINT MOVE IN FEBRUARY; BEGLEY PACES CHAINS
The stock of vitamin supplier P. Leiner showed signs of rejuvenation in February, moving up three points to 9-1/2 during the month. The leap year closing left the issue at roughly the same trading price as in late October, but at only half of its July 1986 peak. Market support for the Torrance, California-based firm may have focused on the February acquisition of Vita-Fresh, a move that will push P. Leiner's annual sales above $100 mil. The stock run-up occurred despite the company's most recent operating results -- P. Leiner reported declines in both sales (15% to $17 mil.) and net income (19% to $75,000) for the third quarter ended Dec. 31. As one of the two largest vitamin suppliers to mass market retailers, P. Leiner has been adversely affected by restructuring in the chain drug industry, according to Kidder Peabody analyst Barbara Kahn. Following changes in ownership, managements tend to focus more on finances rather than operations, and inventory levels, as a result, tend to decline. On the other hand, Kahn notes, mass market retailers will continue to pick up sales at the expense of health food stores, direct sales and mail order businesses. At the same time, an uncertain industry environment will put pressure on small manufacturers, thus increasing opportunities for the larger players. Kahn estimates the U.S. vitamin market at about $2.7 bil., of which mass market retailers have a 56% share. "We believe P. Leiner has considerable opportunity to increase market shares," Kahn concludes. "Based on calendar 1986 sales of $72 mil. and the assumption that manufacturer sales represent 60% of retail sales, P. Leiner has approximately a 4% share of the total market and an 8% share of mass market sales. With the current difficult industry environment, many of the smaller manufacturers may be vulnerable to market share erosion or to acquisition." A relatively sluggish Pharmaceutical Component somewhat slowed growth of the Index Composite, which was up just over 4% for the month. The Composite's gain was more than a percentage point behind that of the S&P 400, which climbed 5.4% in February, and nearly two percentage points behind the Dow, up 6% to 2071.62. Overall, 38 issues listed on the "F-D-C" Monthly O-T-C Index advanced, 17 declined and three remained unchanged. Chain stock Begley (up 7-1/2 to 25) and Diversified stock IMS (up 7 to 37-1/4) were the month's two top advances. Both gains resulted from merger offers. Pharmaceutical market research firm IMS was purchased by Dun & Bradstreet in a stock swap deal valued at $1.8 bil. More recently, Kentucky-based Begley agreed to a $28 a share "white knight" offer from Rite-Aid. Begley stock headed an 11.5% advance of the Chain Component. The group's other three members -- Arbor (up 1-3/4 to 11-3/4), Big B (up 1-1/4 to 12) and Medicine Shoppe (up 1-1/4 to 23-1/2) -- all posted gains in excess of a point. Meanwhile, Alco (up 2-5/8 to 18-1/8) and Durr-Fillauer (up 1-5/8 to 11-1/2) paced a 10% advance for the Wholesaler Component. Chart omitted.
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