Hechinger chief isn't looking over his shoulder

DUEL ON THE HOME FRONT

April 26, 1992|By Michael Dresser | Michael Dresser,Staff Writer

John Hechinger Jr. wants to talk about Hechinger Co.

He wants to talk about change and he wants to talk about growth. He wants to talk about innovation and attention to customers. He wants to talk about the future of one of the Baltimore-Washington region's premier companies, a powerhouse in home improvement stores.

He does not want to talk about Home Depot Inc. That's not why the president and chief executive officer of Hechinger agreed to be interviewed at his Landover headquarters this month.

But for Mr. Hechinger there's no escaping it. Whenever he wants to talk about Hechinger, people ask him about Home Depot. Analysts can't discuss the company for more than a minute without comparing Hechinger with Home Depot and Mr. Hechinger with Bernard Marcus, the charismatic chairman of the Atlanta-based company.

And no wonder. Home Depot is fast becoming a retail legend, and Mr. Marcus is widely considered one of America's best corporate leaders.

But Mr. Hechinger has his own story to tell.

After a serious downturn in late 1990 and early 1991, the 117-store Hechinger Co. seems to be getting back on track. No longer just a Baltimore-Washington regional company, the company racked up 1992 sales of $1.6 billion with stores open or planned in most of the states east of the Mississippi.

The company posted respectable earnings of $26 million for the fiscal year that ended Feb. 1, 1992, 12 percent more than in 1991. And Hechinger is jettisoning its 1960s image of "The World's Most Unusual Lumber Yards" and is changing its formats to meet the challenges of the 1990s.

"We are a company on the move," Mr. Hechinger said. "We have a lot of exciting things going on."

Most analysts say Mr. Hechinger has made no obvious mistakes since he took over from his father, John Hechinger Sr., as chief executive officer in 1990. Few expressed any criticism of the earnest, reserved and boyishly handsome young CEO, who, at 42, bears his legacy of family wealth and power with quiet modesty.

However, even people who follow Hechinger closely say they don't know much about John Hechinger Jr. When his father was in charge and the son was chief operating officer, the younger Hechinger kept a low profile. Since he became CEO, he hasn't raised it much.

"You heard of him very little until he became boss," said Cornelius Sewell, an analyst with Argus Research in New York. In recent years, Mr. Sewell said, Hechinger "has kept its head down" and has done less than its chief rivals to court investors or analysts.

One of the questions analysts would like Mr. Hechinger to answer involves the basic identity of the company he heads: Will the Hechinger Co. become a full-fledged national player?

In his recent interview, Mr. Hechinger's answer was ambiguous. "I wouldn't categorize it as a national or a regional," he said.

By contrast, Atlanta-based Home Depot's ambitions ring out like a rebel yell.

"I can't tell that we'll be in all 50 states but we fully intend to be a national company," said Home Depot spokesman Lonnie Fogel. He said Home Depot probably will have 533 stores by the end of 1996 and about 1,000 by the end of the decade.

The 178-store chain has already seized the No. 1 spot in the market, even though it operates in only 15 states. In a highly fragmented home improvement industry, where even the leader holds only a 5 percent share of the market, its growth potential is enormous. Alex. Brown & Sons analyst Christopher E. Vroom has predicted that Home Depot will grow to $25 billion in sales by the end of the decade from $5.1 billion in fiscal 1991 by "steamrolling the competition."

But Hechinger is not just sitting back and letting Home Depot have its way. Hechinger plans to open 14 of its Home Quarters warehouse stores this year -- in many cases stealing a march on Home Depot in the race to enter such new markets as St. Louis, Louisville, Ky., and Cincinnati.

The 33-store Home Quarters chain, which already has a strong presence in the Southeast and New England, is unfamiliar to shoppers in the Baltimore-Washington area. But according to Mr. Hechinger, the warehouse format will be the company's "primary growth vehicle" during the 1990s.

The Home Quarters format has been described as a clone of Home Depot's warehouses -- but a very good one. "If you're color-blind, you can't see the difference," said Neal Kaplan, vice president of Richmond-based Scott & Stringfellow.

As a result, Hechinger might be least vulnerable to Home Depot in its newer markets, where Home Quarters is taking root. In Baltimore and Washington, the company's response is limited because it is locked into dozens of existing locations -- most of them too small to convert to the powerful warehouse format.

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