The Central New Jersey Home News from New Brunswick, New Jersey on September 21, 1986 · 41
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The Central New Jersey Home News from New Brunswick, New Jersey · 41

Publication:
Location:
New Brunswick, New Jersey
Issue Date:
Sunday, September 21, 1986
Page:
41
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a D STRICTLY PERSONNELD4 MARKETS D7-11 GOT A PROBLEM? D11 SUNDAY. SEPTEMBER 21. 1986 Th Horn Hvm En Gardner Market can recall summer of records The Growing Empire of Frank Lorenzo OCONTINENTAL By CHET CURRIER AP business writer NEW YORK - Wall Streeters accustomed to grumbling about the "summer doldrums" in the financial markets had little reason to complain this year. As the summer of 1986 officially gives way to autumn, they can look back to a season that produced record highs, record declines, and record trading volume in the stock market. The market hit new highs just before July 4, took a sharp drop through the rest of the month, rallied vigorously in August, and then ran Expanded stock listings Pages D7-U into another severe storm of selling after Labor Day. As most analysts see it, the fall could well bring more sudden mood swings. It begins with investors' first full look at a bill that makes drastic changes in the U.S. tax system. A little more than six weeks away is the midterm election that will determine, among other things, the makeup of Congress in the last two years of President Reagan's administration. With all that, the first question on Wall Street's autumn agenda focuses on the markets themselves: Is the recent slide in bond and stock prices a temporary "correction" or the start of something more serious? "We expect stock prices, as mei-sured by the Dow Jones industrial average, to continue to consolidate and correct," says Hugh Johnson at the brokerage firm First Albany Corp. "We expect this process may last until November." Nevertheless, looking further ahead, Johnson describes the outlook as "very favorable. We expect stock prices, in time, to rise above 2,000. Most investors should continue to ignore forecasts of short-term market swings." Robert Farrell, chief market analyst at Merrill Lynch, says an important determinant of individual investors' behavior will be their response to the tax bill. "By eliminating the tax advantage for long-term capital gains after 1986," he says, "the tax proposals are also encouraging investors with big profits to take them before the end of this year." A lot of this money is expected to be reinvested in the market, in many cases in the same stocks that were sold purely for tax reasons. However, says Farrell, "a crucial point is whether reinvestment of funds from tax selling is immediate or delayed. "We suspect that investors may permit liquidity to accumulate for a See MARKET, Page D2 S-'- iH 0 NEW YORK AIR . ' i J, V f I 0 TZssSZ-. ' A ' V i "singion. D C . j v . r . f San Francisco 11 lA I-. -U -k' ' - , ' Houston y : '.;,,,- , A:A r-J:k 4 , I O f t gi T N 1 ' 1 11111 " 11 " ' I -i 3) KVJ : ' PEOPlExpmss- EASTERN By SANDRA LIVINGSTON Home News business writer If Frank Lorenzo gets his way, about seven out of every 10 travelers at Newark International Airport will fly on one of his planes. Lorenzo, observers say, usually gets his way. His company, Texas Air, last week became the nation's largest airline holding company when the government gave the go-ahead for its takeover of Eastern Airlines. No close second is in sight. And if his plans, announced Monday, to pick up People Express and Frontier Airlines are successful, Lorenzo would command a fleet, second in size only to Aeroflot, the Soviet carrier. That may come as a surprise to people who thought Tex as Air sounded like a modest regional carrier. "Basically he is a winner," said Paul Turk, of Avmark Inc., an aviation consulting firm. "He has had a pretty unbroken string of ties if not outright victories." Total figures The Texas Air fleet would include about 590 jets, making nearly 2,750 departures daily from 202 airports. Employment would top 60,000 at the outset. If Texas Air, Eastern and People Express Inc. had been merged before year-end 1985, they would have combined revenues of $7.7 billion and a net income $69.8 million. Only People Express posted a loss. Observers say the expansion is spurred less by ego than by the de sire to reach a large enough size to survive. They describe Lorenzo as a demanding and sometimes ruthless executive who wants to keep a low profile. "He's not the type of guy who wants his face on the cover of Businessweek," said an analyst who asked not to be identified. Francisco A. Lorenzo, a 46-year-old Queens, N.Y. native, turned a foundering Houston airline into an empire. He did it with shrewd business maneuvers and hardball labor tactics, the same techniques he is expected to rely on to create a national low-cost, full-service fleet of carriers. The plan to take over People Express must be a sweet one for Lorenzo. It means he would again be the boss of protege-turned-rival Donald Burr, founder and head of the New ark-based no-frills carrier. Both men seized the opportunity wrought by airline deregulation to build their airlines and shake the industry with fare wars. But Burr stumbled when he tried to expand too rapidly. Analysts say Lorenzo's plan for growth is more measured. And so for the moment, it is Lorenzo who has become the pre-eminent player to navigate the turbulence of deregulation. "He emerged the clear winner and may be the big winner in the industry if he keeps all the balls he's juggling in the air," said Louis Marck-esano, an analyst with Janney Montgomery Scott Inc. Adding People The balancing act became more complex last week when Lorenzo moved to widen his sweep. Texas Air, the lone bidder for People Express Inc., plans to pick up the faltering carrier at a bargain-basement price of $125 million. Analysts said People Express, which lost $132.5 million in the first six months of this year, tired to expansion too quickly and stressed growth rather than income. Nevertheless, the air line still accounts for about half the travel at Newark Airport. Texas Air also said it intends for an additional $176 million to buy Frontier, the grounded People subsi' diary in Denver that recently filed for federal bankruptcy protection These acquisitions hinge on several approvals and agreements from fed eral agencies, shareholders, workers and creditors. See LORENZO, PageD2 The Home News 'Nat Clymer , '' Jeffrey Martin finds market getting crowded Jeffrey Martin Inc. has made these products well-known nationally. By LIZ OAKES Home News business writer Caught in the crossfire of the new toothpaste product wars, Jeffrey Martin Inc. is being squeezed out of space it once occupied on retail shelves and in market niches. Jeffrey Martin, a developer and marketer of over-the-counter medicines and health and beauty aids, has built a reputation on its marketing of innovative products such as Topol toothpaste, analysts said. Topol, introduced nationally in 1979 to reduce nicotine stains, was the first product in the smoker's segment of the toothpaste market. Topol has accounted for as much as one third of the company's sales, analysts said. Based in Union, the company uses national advertising spots to gain wide name recognition for its brands. Jeffrey Martin's major products include Lavoris mouthwash, Porcelana skin bleaching agent, Cuticura medicated soap, Compoz sleeping aid, Ayds appetite suppressant, Bantron smoking deterrent and analgesics Doan's Pills and backache spray. Jeffrey Martin's method traditionally has been to develop products or acquire them from other companies, but not to manufacture them. The company is a heavy advertiser and marks its products high to achieve large returns, analysts said. The higher the product price, the more the company can spend on advertising. But in the past few years, Jeffrey Martin has seen sales slide for a few of its products particularly Topol, Ayds and Bantron. Overall, the company's performance has been weak in recent years as well. In its fiscal year that ended July 31, the company's revenues fell to $54.3 million, down 17 percent from fiscal 1985. Net income dropped 88 percent in fiscal 1986 to $474,000, or 5 cents a share, from $4 million, or 40 cents a share in 1980. The company does not break down sales fc individ ual products. On June 18, Jeffrey Martin announced it had retained Morgan Stanley & Co. Inc. to help the firm map out its future strategy, including a possible merger with another consumer products company. According to Frank P. DiPrima, executive vice president and chief operating officer, the company will not currently comment on any topic beyond confirmation that it is still pursuing a merger. The consumer products firm is traded on the National Association of Securities Dealers Automated Quotations system. When Jeffrey Martin first went public three years ago, "it looked like a promising kind of company," said William Gibson, an analyst with Sutro & Co. The company had no long-term debt, and its revenue had jumped to $62 million from $20 million in 1980. At the same time, its net income had grown to $8.1 million, or 81 cents a share, in 1983, from $1.2 million or 12 cents a share three years previous. But once big-time competitors such as Colgate and Proctor & Gamble began to market pump dispenser packaging, gels and other products billed as plaque and tartar fighters, Jeffrey Martin "got caught in the toothpaste wars," he said. Repeat business for Topol fell off as new products proliferated, and the company had to scramble for retail shelf space, he said. "The company has seen increasing competition for most of the product lines," said Jeffrey D. Ashenberg, analyst with Dean Witter Reynolds. The company has tried to pump up other products into strong brands, analysts said. In July 1984, Jeffrey Martin bought Lavoris mouthwash from Richardson-Vicks Inc. and last August introduced Topol mouthwash. But the new mouthwash hasn't lived up to the company's expectations and a Lavoris franchise is still being built, according to analysts. "The difficult competitive environment faced by Topol smoker's toothpolish and Ayds appetite suppressant in 1986 hurt sales of these products and put pressure on operating profits," Martin Himmel, Jeffrey Martin's chairman and president, said in a statement last week. In an effort to stem its revenue loss, the company said it plans to introduce new products, improvements and line extensions. The company has faced heavy-hitting competition for other products besides Topol. In 1981, Jeffrey Martin purchased Bantron tablets, Cuticura, Ayds and Doan's pills, among other products, from Purex Industries Inc. of Lakewood, Calif. Then, there were few other anti-smoking products. But in 1984, Merrell Dow Pharmaceuticals Inc., owned by Dow Chemical Co., introduced Nicorette, a prescription drug to help stop smoking. But despite the company's current problems, some in the health and beauty aid industry still consider Jeffrey Martin an outstanding marketer. "Their reputation as being tremendous marketers still stands," said Philip Weinstein, president of Affiliated Drug Stores Corp. in New York. "What happened is that major manufacturers have come out with products copying some of theirs and that, frankly, has hurt (Jeffrey Martin's) efforts." The company has said it is trying to cut costs and beef up its product line, and some observers said that may help. Jeffrey Martin executives run a "real lean company," Gibson said. Himmel, who built up Jeffrey Martin as a private firm and who still owns a big chunk of its stock, is a "a super-salesman," he said. But although Jeffrey Martin has brought in outside management and outlined new product strategies over the past year, the sales outlook remains depressed, analysts said. "If the company remains in business as an independent competitor, more than a moderate rebound in earnings in the next fiscal year is unlikely," Ashenberg said. Without another growth product, analysts said, Jeffrey Martin's revenues and profits may continue to drift downhill.

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