Sales in established Hechinger Co. stores barely budged in July, a lackluster showing that reflects continued tough competition in the home-center business and the fact that some of Hechinger's best stores are too new to show up in some corporate indicators.
Revenue in Hechinger stores open for at least a year increased by 1 percent last month, less than the gains reported by other major retailers. But overall sales at the Landover-based company rose by 18 percent to $195.1 million for the month, propelled by its fast-growing Home Quarters Warehouse division.
"I thought that the numbers were fine, given the circumstances that Hechinger remains under," said Kenneth Lucas, a retail analyst for Washington investment house Johnston, Lemon & Co. Inc. "Competition continues to be very keen."
Kimberly Howard, an analyst with Dillon Read & Co. in New York, said she was "slightly disappointed" by the results but still strongly recommends Hechinger stock.
The company's same-store results should improve in coming months, she said, once contributions of its new, 130,000-square-foot Home Quarters stores are taken into account.
All 13 of those larger stores have opened in the last year. Same-store figures include only outlets that have operated for a year or more. Ms. Howard said company officials have told her that they expect year-on-year sales increases from the new, big stores to be in the "high single digits."
Total July sales for the Home Quarters unit rose by 42 percent to $108.9 million.
Hechinger fights for shoppers against Home Depot, Lowe's and other growing home-center warehouse stores.
Price wars have hurt profits at the chains, but, Ms. Howard said, Hechinger has chosen to raise prices slightly in some markets, especially the ultracompetitive Carolinas region.
That contributed to sales weakness in July but may help profits, which will be reported later this month.
Ms. Howard expects Hechinger to report earnings of 47 cents a share for the quarter ended July 30.
For the year to date, Hechinger Co.'s same-store sales have increased by 3 percent.