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Hechinger shutting down here 5 Builders Square outlets also targeted for closing Saturday, June 12, 1999 By Teresa F. Lindeman, Post-Gazette Staff Writer
The intensely competitive hardware business claimed a major victim yesterday, as Hechinger Co. sought Chapter 11 bankruptcy protection from its creditors.
The nation's third-largest hardware retailer, which lost $228 million in the last quarter alone, said it would close nearly half its stores, including all its stores in the region.
A spokesman for the Largo, Md.-based company said liquidation sales would probably start in a few weeks, subject to bankruptcy court approval. The process could take three to six months.
Based on an average of 75 employees per store, nearly 700 people could be affected in this region. They may not all lose their jobs, said Hechinger spokesman Sean Flynn.
Stores to be closed in the region are Hechinger sites in Monroeville, West Mifflin, Scott and Ross. In addition, the company will shut down Builders Square locations in Braddock Hills, West Mifflin and McCandless, as well as in Chippewa and Erie.
A total of 89 store closings will leave the company with 117 stores in 21 states.
"Filing Chapter 11 and closing these unprofitable locations is the first crucial step in our efforts to re-make Hechinger," said Hechinger chief executive Mark Adams in a prepared statement.
The hardware retailer has been under renovation for the past several years as its management has tried to regain market share lost to the two top-ranked chains, Home Depot and Lowe's.
In recent months, there were plenty of signs that things weren't working out. Not long ago, a turnaround team was brought in to review the operation and, just a few weeks ago, Hechinger missed a debt payment that prompted Standard & Poor's to lower its credit ratings.
Consumers could see it, too.
"If you went into the stores, they were understaffed and understocked," said analyst Kenneth M. Gassman Jr., with Davenport & Co. in Richmond, Va.
Gassmann said the company may have finally decided to file bankruptcy after calculating that sales at stores open at least a year had dropped nearly 20 percent.
Hechinger began as a family-owned business and was once considered a leader in the home improvement industry. Its large stores offered an assortment of supplies that smaller neighborhood retailers couldn't.
Home Depot and Lowe's took the superstore idea and improved on it, often building even bigger stores than Hechinger had built. In the early 1990s, the two competitors began proving they could set up shop successfully in some of Hechinger's best markets.
By 1997, the Maryland company accepted a buyout offer from an investment group led by Leonard Green and Partners. The new owners also picked up the Builders Square chain from Kmart Corp.
The company has continued to operate stores under both names, but it has been slowly renovating key locations and renaming them Home Quarters Warehouse. It also has closed numerous sites.
Gassman said Hechinger has not had the financial strength to add stores in the growing suburban areas, unlike Home Depot and Lowe's. In Pittsburgh, for example, Home Depot and Lowe's have announced new sites in places like Cranberry, South Strabane and Robinson, with little response from Hechinger.
Kmart Corp, which guaranteed the leases of the Builders Square stores as part of the sale, said yesterday it would take a $230 million non-cash charge to cover the costs of stores reverting to its control.
A Kmart spokesman said several big-box retailers have already expressed interest in using some of the Builders Square sites. In addition, he said, the company may want to convert a few into Kmart stores. The sites average 100,000 square feet.
Hechinger listed $1.32 billion in assets and $1.39 billion in debts in its Chapter 11 petition, according to Bloomberg. One of the largest unsecured creditors is reportedly Pittsburgh-based PPG Industries, owed $3.6 million.
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