Hechinger profits fell 55 percent in fourth quarter

February 24, 1994|By Ross Hetrick | Ross Hetrick,Sun Staff Writer

Hurt by poor weather in the last five weeks, Hechinger Co. yesterday reported that net income dropped 55 percent in the fourth quarter that ended Jan. 29, although for the full year earnings rose by more than $51 million.

Besides the poor weather, the fourth-quarter net income of $1.2 million was hurt by an adjustment in inventory valuation that reduced profits by $2.6 million, the company said. The comparison with the previous fourth quarter was further worsened by a $1.6 million tax credit in the quarter that ended Jan. 30, 1993.

Before taxes, fourth-quarter earnings actually increased 11.2 percent.

For the year, the Landover-based chain of home improvement stores had a net income of $24.8 million, compared with a $26.3 million loss in the previous year. The 1992 loss included a $57.3 million reserve for costs for restructuring the company's Hechinger store subsidiary.

Hechinger Co. operates 125 home center stores in its two subsidiaries -- Hechinger Stores and Home Quarters Warehouse. There are 72 Hechinger stores, split between 44 traditional Hechinger stores and 28 Hechinger Home Project Centers. There are 53 Home Quarters Warehouse stores.

"It sounds to me that they are doing a heck of a lot better," said H. Bernard Dorshow, an analyst for The Chapman Co., a Baltimore-based investment banking firm. "The trends are doing pretty well."

Mr. Dorshow was particularly optimistic about the company's new push on building and revamping stores along the lines of a new store in Chesapeake, Va., which has proved successful.

And even in areas where the company must rely on its traditional store format, it has met increased competition, particularly in the form of Home Depot.

"The company has gotten itself into a position that is pretty price competitive," Mr. Dorshow said.

The pre-tax increase in fourth-quarter profits was rated satisfactory by the company.

"We really would have liked an after-tax earnings increase," said W. Clark McClelland, executive vice president of Hechinger.

To strengthen future earnings, the company is boosting construction and conversions of stores along the lines of its Chesapeake store.

These features include expanded lawn and gardening centers and a greater emphasis on providing service and supplies to contractors.

In the last year, the company has opened eight of these 110,000-square-foot stores. This year it plans to open 11 new stores modeled after the Chesapeake store and convert 19 Home Quarters Warehouses.

Hechinger customers in the Baltimore-Washington area won't be seeing these new stores since this area is served by the traditional Hechinger stores.

To receive, by fax, a copy of Hechinger's fourth-quarter earnings report, dial Sunfax at 410-332-6123. After you hear the greeting, punch in the four-digit code 5600.

Hechinger Co.

.. .. .. .. .. .. .. .. .. ..Ticker .. .. .. .. ..Yesterday's

.. .. .. .. .. .. .. .. .. ..Symbol .. ...Cls... .. .. ..Chg.

.. .. .. .. .. .. .. .. .. ..HECHA .. .. .10 7/8 .. .. .. .. ..+ 3/8

.. .. .. .. .. .. .. .. .. ..HECHB .. .. .10 5/8 .. .. .. ..Unch.

Period ended

1/29/94 .. .. .. .. .. ..4th qtr. .. ...Year ago .. .. .Chg.

Revenue .. .. .. .. .. ..$486,205 .. ...$417,492 .. ..+16.5%

Net Income .. .. .. .. .. .$1,243 .. .. ..$2,780 .. ..-55.3%

Primary EPS .. .. .. .. .. .$0.03 .. .. ...$0.07 .. ..-57.1%

.. .. .. .. .. .. .. .. ...12 mos. .. ..Year ago .. .. .Chg.

Revenue .. .. .. .. .. ..$2,109,702 .. $1,880,092 .. .+12.2%

Net Income .. .. .. .. .. ..$24,760 ...$(26,272)* .. .. ..--

Primary EPS .. .. .. .. .. ...$0.59 .. ..$(0.63)* .. .. ..--

* Includes an after-tax charge against earnings of $57.3 million, or $1.37 a share, to create a strategic reserve.

Figures in thousands (except per share data).

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