Hechinger posts earnings gain in third quarter

November 27, 1991|By Michael Dresser

Hechinger Corp., the Landover-based home improvement chain, overcame a third quarter that was difficult for most retailers and posted a 33 percent earnings gain, the company said yesterday. Net earnings were $6.5 million, compared with $4.9 million in 1990's third quarter.

Despite that earnings surge, and an increase in quarterly revenues to $400.6 million, two retail analysts said that they were cutting their projections of Hechinger's fourth-quarter profits.

"In a pretty punk economy, they posted some pretty good results," said Budd Bugatch, research director at Ferris Baker Watts in Baltimore. Nevertheless, he said, he was lowering his projection of full-year earnings from 85 cents to 79 cents because he expects a weak fourth quarter for retailers.

Kenneth M. Gassman, retail analyst with Davenport & Co. in Richmond, Va., cut his 1991 estimate from 85 cents to 75 cents for the same reason. Like Mr. Bugatch, he said the third-quarter numbers were in line with his expectations.

A spokesman for Hechinger could not be reached for comment.

The sharp increase in third-quarter net earnings, which follows a weak quarter the year before, could largely be attributed to the expansion of Hechinger's Home Quarters chain of warehouse stores, Mr. Gassman said.

Most of Hechinger's Home Quarters stores are located in the Southeast and New England, with none in the Baltimore-Washington region.

Hechinger's third-quarter earnings per share of 16 cents, compared with 15 cents in 1990, were not as impressive as the net earnings figure, largely because a June stock offering increased the number of shares outstanding.

Total sales during the quarter were up 15 percent from last year's $349.0 million, but comparable store sales rose only 2 percent.

Gross margins and sales and administrative expenses were down -- a reflection of Home Quarters' contribution, Mr. Gassman said.

In yesterday's earnings announcement, Hechinger said that it plans to open 14 new Home Quarters stores next year, but Mr. Gassman said that a more realistic number would be 12.

For the first three quarters of 1991, Hechinger's net earnings were $27.6 million, or 71 cents a share, up from $24.1 million, or 68 cents a share, in 1990. Sales totaled $1.250 billion, compared with $1.083 billion the previous year.

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