Is Heilig Meyers Sitting Prettier?

Heilig-Meyers (HMY), a furniture retailer in Richmond, Va., is among the hundreds of stocks that have taken a beating despite the market's overall advance. In the past year, its shares have fallen 26%. So far in 1997, the decline is 7%. Now at 15, this Big Board stock is approaching a 52-week low. "The company has been hit from all sides--greater competition, slower growth, higher financing costs, and losses," notes David Tillson, a managing director at U.S. Trust.

But Tillson, who has a big stake in Heilig-Meyers shares, is buying more stock. In his view, it's ripe for a turnaround--and soon. The company sells furniture, appliances, and consumer electronics through its 750 outlets in 26 states and Puerto Rico. Heilig-Meyers finances many of the purchases made by its mainly low-income customers. So it's "a finance company as well as a retailer," notes Tillson. With competition brutal, necessitating merciless price-cutting, profits have been on the wane lately. In the fiscal year ended Feb. 28, 1997, sales climbed to $1.6 billion, up from $1.4 billion the year before. Meanwhile, earnings were only $40 million, or 80 cents a share, down from $42 million, or 84 cents.

Tillson says, however, that the company is doing less price-cutting. And it has completed the costly absorption of two recent acquisitions. With costs under control--and barring a recession--Tillson sees profits rising to $1.15 a share this year. And that, he notes, may push the stock into the mid-20s.