Hechinger's earnings, sales decline in third quarter Losses had been predicted for home improvement firm

November 21, 1996

After a brief upswing in profits in the second quarter, the Hechinger Co. said yesterday that earnings and sales for the third quarter were down, indicating the company's attempts to reposition itself in the market place have yet to bear fruit.

The Landover-based company reported a third-quarter loss of $9.96 million, or 24 cents a share, compared with a loss of $6.4 million, or 15 cents a share, for the same period a year ago.

The company's sales dropped 3 percent, to $533.3 million, in the quarter, compared with $549.2 million last year. And same-store sales -- a key indicator of performance -- were down 5 percent for the third quarter.

The losses were within the range of analysts' predictions.

"Everyone is still basically holding their breath to see if they are going to be able to come back [to profitability]," said Sheldon Grodsky at Grodsky Associates in South Orange, N.J. "Basically, the signals are mixed."

The company attributed some of the drop in sales to the fact that employees were preoccupied with a consolidation in two chains -- Hechinger Stores Co. and Home Quarter Warehouse, two subsidiaries of Hechinger Co.

Richard S. Gross, senior vice president and controller, said the company combined computer systems from the two chains that "tracks everything the stores do." In addition, the chains combined the suppliers they use.

"It wasn't the cost of doing these things. It was that our people were spending a lot more time on this than spending time on customer service," Gross said.

Now that Hechinger has made the changes, Grodsky said, the question is whether it will be able to attract more customers from its competitors, Lowe's Cos. and Home Depot Inc., both of which have been expanding while Hechinger has been hunkering down and trying to retrench.

Hechinger was battered by the competition in 1995, when percentage sales drops began to go into the double digits. But in the second quarter of this year, the company appeared to bounce back with a 34 percent increase in earnings to $12.2 million, or 28 cents a share.

In the first nine months of 1996, the company reported a loss of $3.7 million, or 9 cents a share, compared with net earnings of $3.9 million, or 9 cents a share, for the same period last year. Sales for the first nine months of the year were $1.76 billion compared with $1.75 billion for the same period last year, an increase of 1 percent.

However, same-store sales were down 3 percent for the first nine months of the year.

Hechinger has 117 stores in 21 states and the District of Columbia.

Pub Date: 11/21/96

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