Hechinger, Home Depot deep in hardware battle


September 25, 1991|By Michael Dresser

They're battling it out with hammers and chains saws in Glen Burnie.

Home Depot, the nation's largest do-it-yourself retailer, and Hechinger, the regional hardware heavyweight, have been going head-to-head there since June. So far, they both appear to be winning. The losers, apparently, are everybody else in the business.

Hechinger began mounting an aggressive defense of its turf even before the Atlanta-based behemoth moved into the Baltimore-Washington market.

In March, Hechinger introduced its new Home Projects Center format -- a significant departure from the traditional Hechinger floor plan -- at its Glen Burnie store on Ritchie Highway, barely a mile from the gigantic Home Depot at Route 10 and New Ordnance Road.

The Home Projects Center concept, designed to appeal to the serious do-it-yourselfer as well as professional contractors, now is at seven other Hechinger stores, all but one of them in the core Baltimore-Washington market. In farther-flung parts of its trading area, including New England and Ohio, Hechinger is confronting Home Depot even more directly with its Home Quarters warehouse format.

For Hechinger, the Home Projects format simply has to succeed, because the challenge is by no means confined to Glen Burnie. A new Home Depot is slated to open in White Marsh late this year or early in 1992, and others are set to open in Catonsville and Alexandria, Va., by the end of 1993.

Home Depot is a retailing phenomenon. After starting the company from scratch in 1978, Chairman Bernard Marcus has led the company from $22 million in sales in four stores in 1980 to $3.8 billion in 145 stores in 1990. At last count, the company was operating more than 146 stores in 14 states.

And Wall Street is in love. Home Depot's stock price has skyrocketed from less than $9 in 1987 to more than $50 a share today.

Stock market analysts' reports on Home Depot read like valentines. Goldman Sachs calls Home Depot's warehouses "the best stores in the retail industry." Montgomery Securities hails it as "one of the top retailers in the United States." And Donald I. Trott, specialty retail analyst at Dean Witter Reynolds, calls it "America's best-quality growth stock bar none," with the potential to grow to a 1,200-store nationwide chain.

If those paeans of praise sound familiar, Mr. Trott makes it clear why. During the 1990s, he says, Home Depot "will be to retail investing what Wal-Mart was over the past 10 years."

It's a frequently heard comparison. Like Wal-Mart, the largest U.S. retailer, Home Depot has screamed out of the South to the top spot in its specialty with lightning speed. Both are led by charismatic, hands-on founders with a personal touch. Both emphasize customer service and boast "everyday low prices."

Home Depot is celebrated for its egalitarian corporate culture. Store managers eschew ties and pitch in to push carts when needed. Mr. Marcus, the chief executive, likes to drop in on stores casually dressed and without an entourage and schmooze with front-line employees. Each quarter, he and President Arthur Blank field called-in questions at a meeting with all 23,000 employees via satellite TV hookup.

Nobody is calling Hechinger's management the best in the retail business, but neither is the team led by John W. Hechinger Jr. regarded as patsies. With its 1988 acquisition of Home Quarters, Hechinger's compound annual sales growth from 1984 to 1990 was 23.9 percent. That's a far cry from Home Depot's 40.2 percent, but it's better than any of the other top home improvement retailers, even edging out Wal-Mart's 23.6 percent.

The Landover-based company's Home Projects Center concept, which it says was in the works even before the Home Depot challenge began to materialize, has been well-received by analysts who follow the company.

A look at the two Glen Burnie stores reveals many of the similarities and differences of the two companies.

The Home Depot store is a veritable Tool Chest of the Gods -- a 105,000-square-foot cavern with products stacked 25 feet to 30 feet high (there's another 30,000 in selling space outside). The breadth of the selection is astonishing, an estimated 30,000 different products. "We take a lot of pride in basically staying in stock," says assistant manager Sean Sites.

With its cement floors and milling forklifts, there is no way to mistake Home Depot for anything other than a warehouse, but its bright lighting and its blazing-orange color scheme create an almost frenetic ambience. This is power retailing. It virtually screams, "We can get it for you wholesale!"

In contrast, the 60,000-square-foot interior of the Home Projects Center is a soothing presence, well-positioned to attract customers who are intimidated or put off by Home Depot's gargantuan scale. Its blue-and-white colors lend a softness to buying hardware. Merchandise is stacked high, as in a warehouse store, but at ground level the new Hechinger is more of a showroom.

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