Toys R Us knows its market niche and has right elements to succeed

Answering the mail

January 15, 1992|By Andrew Leckey

Q: With another disappointing holiday season for retailers, is it time to sell my shares of Toys "R" Us?

A: The grinch shouldn't affect the world's largest children's retail chain in 1992.

Don't sell shares of Toys "R" Us Inc. (around $34 a share, New York Stock Exchange), for this company knows its niche in the market and has all the right elements in place to succeed, said Donald Trott, analyst with Dean Witter Reynolds.

Toys "R" Us reported a healthy 7.9 percent same-store sales gain for the eight weeks ending Dec. 28, while overall sales were up 16.4 percent.

Price cuts remain a necessary part of its business, as has been the case with so many other retailers during the recession. The company offers quality, competitively priced toys at its 451 U.S. and 97 international toy stores, and has plans to open 85 to 90 more toy stores worldwide in 1992. It also owns 180 Kids "R" Us clothing stores.

Toys "R" Us has gained a lot of attention with its recent successful entry into the Japanese market.

"Toys 'R' Us has a history of quality and service," said Trott. "I consider its stock well worth buying or holding."

Q: I have been reading about ConAgra Inc.'s new lean ground beef. Is this a good reason to buy its stock?

A: Investors should have no beef with this stock's results.

Buy shares of ConAgra Inc. (around $36, NYSE), the bakery, flour, feed and poultry firm, because its 15 percent growth rate is attractive, said Roger Spencer, analyst with PaineWebber Inc.

ConAgra has turned in a dozen years of record sales and earnings, bolstered by famous brand names such as Peter Pan peanut butter, Banquet frozen foods, Country Pride, Armour Classics, Swift-Eckrich and Chun King. Its Healthy Choice product line, featuring food low in cholesterol and fat, is doing particularly well due to the health-consciousness of Americans.

"Besides those well-known products, ConAgra services the entire food chain, from the commodity to the packaged product," explained Spencer.

"Its research efforts came up with the extra lean ground beef which you mentioned, and ConAgra is definitely a stock you'll want to own in 1992."

Q: My broker is recommending shares of Waste Management. Don't you think they're expensive?

A: They're not expensive, based on the potential for gain. It would be difficult to go wrong with shares of Waste Management Inc. (around $46, NYSE), the solid and chemical waste management leader, based on its 25 percent revenue growth over the past decade, said Vishnu Swarup, analyst with Prudential Securities.

"I like Waste Management because it offers a full gamut of services from landfills and solid waste management to recycling," explained Swarup. "I expect that 1992 earnings per share will be $1.80, vs. $1.60 in 1991."

Waste Management owns 77 percent of Chemical Waste Management, which has had to face restrictions placed on some hazardous waste disposal sites.

Waste Management Europe experienced a 35 percent gain in revenues in 1991. One management innovation is the offering of in-house consulting for large corporations to handle waste disposal, Swarup noted, a popular idea in light of the Environmental Protection Agency's strict rules and penalties for illegal dumping or pollution.

Waste Management is also expected to gain market share because the owners and operators of a number of solid waste landfills won't be able to muster the operating, technical and financial resources necessary to comply with new requirements.

Q: With the new year here, what are some tax-saving tips C should follow now?

A: If you put money in an individual retirement account, do so early to obtain maximum benefit from it, advised James Schlesser, tax partner with Deloitte & Touche. In addition, if your company offers a 401(k) retirement program, be sure to participate, he added.

"There are significant changes in estimated tax payment requirements," Schlesser concluded. "Be sure to make these on time and in the right amount to avoid penalties."

Q: What is your opinion of my shares of Bell Atlantic?

A: It's not flashy, but it's no slouch either.

Patient investors will be well-rewarded for holding Bell Atlantic Corp. (around $49, NYSE), holding company for seven telephone companies serving the mid-Atlantic area, said Sharon Conway, based in Chicago with A. G. Edwards & Co.

The firm also operates directory/advertising divisions, financial services, real estate computer maintenance and paging communications.

Its investment in New Zealand, in a joint venture with Ameritech to purchase Telecom Corp. of New Zealand, has been successful.

Although recent corporate earnings have been flat due to the economy, its cellular business is up nearly 25 percent. The stock's potential total return could be 11 percent, Conway estimated.

"Bell Atlantic's sound financial structure and strong cash flow are adequate to fund any construction expenses and dividend needs," noted Conway. "The company is diversifying and offers excellent long-term prospects."

Andrew Leckey answers questions only through the column. Address inquiries to Andrew Leckey, Chicago Tribune, 435 N. Michigan Ave., Chicago, Ill. 60611.

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