BUSINESS PORTFOLIO

September 4, 1987

Exercise pumps profits Americans may be exercising less, but the sporting goods business is shedding no sales. Thirty percent of those polled said they exercised strenuously at least three times a week in 1985, down from 33 percent in 1983, according to a recent study by Find/SVP Research Company. In the same period, sales of exercise equipment grew by 27 percent.

The wealthier and better educated a person is, the more likely he or she is to pump iron or swelter in a sauna. And that's given corporate America a good marketing tool.

Hotels, which have entire floors vacant because of overbuilding, see exercise facilities as a hook for affluent travelers, or ones on an expense account. ``Most of our guests are business people,'' says Dashiel Wham, a spokeswoman for Westin Hotels, which will spend $50 million on fitness centers over the next few years. ``At home, they maintain a pretty rigorous fitness schedule, and they want to keep it up when they're on the road.''

When not on the road, more people are paying $25,000 to build gyms in their homes, and some manufacturers of institutional-quality equipment say more than a fifth of their sales are to individuals. Even the less affluent and enthusiastic are paying top dollar for the latest high-tech equipment. One of the hottest sellers, according to Daniel Kasen at the National Sporting Goods Association, is a $2,500, programmable exercise bike, complete with screen that has a computerized picture to make it look like you're going uphill when the pedaling is tougher, downhill when you're coasting. Treadmills costing up to $3,000 are also popular, as are $1,500 rowing machines.

Why the boom in pricey equipment? For one thing, more baby boomers are setting up families, and they want to spend more time at home rather than the racquetball court (a sport in decline). Mr. Kasen says that also explains the boom in camping, a family-oriented activity, and the popularity of other ``gentler'' sports, like walking, cycling, and fishing.

A bad rap for `junk bonds'?

If ``junk bonds'' really come from junky companies, then the nation has a serious problem.

So suggests Drexel Burnham Lambert in its latest campaign to polish the image of junk bonds. In a new pamphlet, Drexel shows that only 5 percent (1,000) of the companies that could raise money by issuing bonds would qualify as investment-grade companies. The other 95 percent (21,867) would have to issue ``junk bonds,'' which are riskier and pay a higher interest to those that buy the bonds. Several states - including New Hampshire and Vermont - do not have even one investment-grade company.

Does that mean that 95 percent of America's companies are poorly operated and thus a bad risk? Not at all, says Drexel, and others agree. Most are small or medium-sized, high-growth companies that are hungry for money to feed their growth, and would rather issue bonds than go to the bank. On average, their performance outstrips that of their more esteemed and rated brethren like Exxon and IBM.

The image problem may rest with the public only. Big money managers like insurance companies and pension funds snap up junk bonds as fast as they can - so much so that New York State, for example, has put a cap on how heavily insurance companies can invest in them.

While junk bonds have gotten ``a bad rap,'' says Gail Hellel, senior vice president of industrial rating at Standard & Poor's, they may be riskier in the future, possibly by 1989. ``Credit quality has deteriorated,'' she says. ``The whole restructuring movement - the leveraged buyouts, aggressive acquisitions - will wind up in trouble.''

Then Drexel will have to write a new pamphlet.

Japanese heirs fare better

Long before the Japanese began beating Americans in the marketplace, they were trouncing them in the savings account. During the 1970s, for example, Japanese stowed away 18 percent of their incomes, versus 8 percent by Americans.

The main reason for this gap, say three researchers at the National Bureau of Economic Research, is bequests. The Japanese left more money to survivors than Americans, and because incomes grew much more rapidly in Japan than in the United States, savings for progeny piled up faster.

In addition, Japanese plunked down larger down payments (35 to 40 percent versus 25 to 30 percent in the US). That, combined with higher housing costs, means the Japanese must save for about 10 more years before buying a home - thus bulging the savings rate.

Finally, US tax law lets people deduct mortgage payments but not savings, encouraging people to put money into home rather than under mattress. In Japan, the reverse is true.