Can Price Co. Shake Off Its Slump?

Cash-and-carry warehouse retailers have been stellar performers this year--except for Price Co., which has been conservative about opening new stores. Its "eroding profit margins and meager sales-volume growth have been a big concern," says Dick Pyle, a managing director at Piper, Jaffray & Hopwood.

Even so, some big investors have been snapping up shares recently, pushing the stock from 40 in mid-March to 50. Why? They contend that Price is becoming aggressive, with plans to open as many as 20 new stores this year, increasing the total to 71.

"I've become wildly bullish on Price," says investment manager Bill Harnisch, managing partner of Forstmann-Leff Associates. He thinks it will accelerate earnings growth to a pace of 20% to 25% starting next year, with earnings rising to $2.80 a share in calendar 1991, $3.40 in 1992, and $4 in 1993, vs. 1990's $2.55. As a result, Harnisch is forecasting a sharp rise in its price-earnings multiple. Price's closest competitor, Costco Wholesale, has a p-e of 43. Price's p-e is currently at 17, off from as high as 27 four years ago.

Some pros say management is starting to pay attention to shareholder value. That suggests to some analysts that Price may sell or spin-off to holders part of its real estate, estimated to be worth $700 million, or $14 a share.

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