Hechinger Co. announed yesterday it will expand its chain of home improvement centers into the Philadelphia area by opening as many as 15 stores there in the next three or four years. The move will increase the number of Hechinger stores by more than 50 percent.
To finance the project, the Washington company plans to sell 700,000 more shares of stock to the public, executives disclosed at a morning press conference.
As part of the stock offering, another 200,000 shares of Hechinger stock will be sold by Hechinger Enterprises, a partnership controlled by the families of President John W. Hechinger and Chairman Richard England.
The stock sales will increase the proportion of Hechinger stock owned by the public from 16.4 percent to 33 percent, leaving the remainder with the families of the children of pioneer Washington lumberman Sidney Hechinger.
The price of the new Hechinger shares which will be offered to the public has not been determined by the underwriters, a syndicate headed by Alex Brown & Sons of Baltimore and the Merrill Lynch White Weld Capital Markets Group.
At over-the-counter market selling prices of about $20 a share, the offering will bring in about $14 million for the company and another $4 million for the Hechinger and England families, minus the costs of the underwriting.
The two company executives would not put a price tag on the push into Philadelphia, but said each new Hechinger store requires an investment of about $1.6 million for the inventory, fixtures and openings expenses -- a total of about $25 million for 15 stores.
Introducing what he called "our Philadelphia story," Hechinger said the invasion of the city and its suburbs in Pennsylvania and New Jersey would be the biggest expansion for the chain, which since it first sold stock to the public in 1972, has grown from 10 stores with sales of $28 million to 26 stores with sales of $147 million.
England said Philadelphia "represents the next logical growth area for our company." In the last couple of years, the company has moved from its Washington base to Baltimore, Richmond, Tidewater Virginia and the Lancaster and York, Pa., region.
In that part of Pennsylvania, he added, the company has already met with what will be its chief competition in Philadelphia -- the Channel Home Center chain owned by W.R. Grace & Co. Channel has about 20 stores in the Philadelphia market, but each of them is barely half as big as the $60,000-square-foot stores Hechinger builds.
The Philadelphia stores will be run and supplied from the new headquarters and warehouse complex Hechinger opened last year in the Ardwick Industrial Park near the intersection of Route 50 and the Capital Beltway in Prince George's County.
When that complex opened, the company said it was designed to service the stores within 200 miles of Washington, a circle that extends from Newark, N.J., to Pittsburgh, through West Virginia to Kentucky to Raleigh, N.C. Within that ring, Philadelphia is a shorter truck trip from the headquarters than Norfolk, England noted.
Philadelphia is the fourth largest retail market in the country with about half again as many people as the Washington region. The 15 stores Hechinger plans in the market is the same number it has in the D.C. area. Suburban sites north and west of Philadelphia have been picked for the first two stores and the company is negotiating for other locations.
Hechinger officials said they will have to hire about 1,500 persons to staff the Philadelphia stores, and will probably add regional management offices to oversee the stores.
The first Philadelphia stores will open next year, along with four other new Hechinger units -- two in Richmond, one near Montgomery Mall in Bethesda and one in Northeast Washington in a shopping mall the company is building on the site of its old headquarters.
The new stock offering will provide part of the funds for the chain's expansion, and the remainder will come from the company's operating earnings, which have paid for most of the 13 new stores opened in the past five years.