Hechinger changes top managers

Lynch, new CEO, is former president of Sports Authority

Store closings to continue

Largo-based chain, in Chapter 11, elevates Stallings to president

July 21, 1999|By Lorraine Mirabella | Lorraine Mirabella,SUN STAFF

Struggling home improvement retailer Hechinger Co. has changed its top management for the second time this year, pinning hopes of emerging from bankruptcy on a former executive of the Sports Authority.

Largo-based Hechinger, which caved in to intense competition and heavy losses with a June 11 filing for Chapter 11 bankruptcy, said yesterday that it has appointed Richard J. Lynch Jr. chief executive officer and member of the board of directors. Lynch, 47, a former president and chief operating officer of the sporting goods chain, had been a consultant to Hechinger for several months.

Hechinger also promoted Don Stallings, executive vice president and chief operating officer, to president and chief operating officer.

Lynch replaces Mark R. Adams, chief executive since March, who the company said resigned to pursue other business interests.

Lynch was unavailable for comment yesterday.

"His appointment was a unilateral decision by the board of directors," said Sean Flynn, the company's spokesman.

The company, which had reported $1.3 billion in assets and $1.4 billion in liabilities in U.S. Bankruptcy Court in Delaware, will continue with previously announced plans to close 89 stores over the next three months, Flynn said.

FOR THE RECORD - In Wednesday's editions, Richard J. Lynch Jr., who was appointed Tuesday as chief executive officer of Hechinger Co., was incorrectly identified as having formerly headed The Sports Authority. Lynch had served as president and chief operating officer but not as chief executive of the sporting goods chain. The Sun regrets the errors.

"My primary goal is to focus on Hechinger's core operations, maximize the return from the store-closure process and work with the rest of the senior management team to develop a plan of reorganization that will win creditor approval and return the company to a healthy financial footing," Lynch said in a statement.

Lynch joined the Sports Authority in 1988 as vice president and chief financial officer. He became senior vice president and chief financial officer in January 1991. In February 1996, he became president and chief operating officer, continuing in that post until last year.

"They're bringing somebody in who's experienced with the successful rollout of big-box retail nationwide," said Mark Millman, president of Millman Search Group Inc., national retail consultants in Lutherville. "They're hoping he can transfer those skills to Hechinger and Home Quarters and stop the bleeding, stop the losses and turn the business around."

Hechinger was struggling in September 1997 when the founding Hechinger family sold the company to the California investment firm Leonard Green & Partners. Green merged Hechinger with the troubled Builders Square chain, a former Kmart Corp. subsidiary.

In March, Hechinger secured $700 million in credit from BankBoston Retail Finance Inc. and replaced its chief executive, Mark S. Schwartz, who had come to Hechinger a year earlier from Wal-Mart Inc. Schwartz left to join Big V/ShopRite supermarkets, a 32-store regional supermarket chain based in Florida, N.Y.

Adams, then Hechinger's executive vice president, chief financial officer and general counsel, stepped in as chief executive.

After the bankruptcy filing in June, Adams had said he thought Hechinger would emerge from Chapter 11 with a redefined focus to operate 117 stores in 21 states. About 60 of the stores to be closed are Builders Square stores. Hechinger also runs stores under the Hechinger and Home Quarters banners.

Adams had said the new vision called for two new formats. A smaller format under the Hechinger name would carry a core assortment of standard items in departments such as hardware, tools, lumber and lawn and garden, and try to be the dominant retailer in categories such as paint and wall coverings. The larger, warehouse format under the Home Quarters name would feature improved service and selection and drive-through lumber departments.

It's too early to say whether Lynch will continue on that course, Flynn said.

"That had been Mark's [Adams] direction," Flynn said. Lynch "needs to look at that and look at the plan and the progress the whole team has made on plans and make decisions going forward."

Retail experts have expressed doubts about the chain's viability, saying plans to save the company have come too late.

Home Depot Inc. and Lowe's Cos. Inc. rank No. 1 and No. 2 in the field, with sales of $30.2 billion and $12.2 billion, respectively, last year, according to Home Center News, a New York-based trade magazine. Hechinger ranks fourth, with sales last year of $3.4 billion, after the Eau Claire, Wis., company Menard, which had sales of $4.0 billion.

"To compete, Hechinger has to be different and have a different niche," Millman said.

"They're being overtaken by two other quality retailers in that category that have had tremendously successful records and continue to grow," Millman said. "Hechinger got a wake-up call too late."

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