Hechinger Co. yesterday showed shareholders a new store concept meant to respond to increased competition in the do-it-yourself home-improvement business.
At its annual meeting, company officials said they have abandoned efforts to set up "warehouse" stores -- huge buildings with bare-bones displays, limited selection and cut-rate prices.
The two-year-old experiment with nine large warehouse stores -- a concept that has drawn much attention in the home center business -- disappointed Hechinger executives because it failed to distinguish the 75-year-old Landover company from its competitors, Chairman John W. Hechinger said.
Industry officials said the stores produced disappointing results. "The stores were making money but Hechinger was used to a higher profit margin and productivity rate than these stores were providing," said one industry official, who declined to be named.
"It wasn't the size of the stores that turned us off," Hechinger said. "What we figured was that they would do very well in a market we were in by ourselves. But when two or more types of warehouse chains are in the same market, we have to differentiate ourselves -- and on more than just price alone. Hechinger is noted for its category dominance and powerful assortment."
As a result, Hechinger said the company plans a "marriage" between the best of the warehouse concept and the traditional Hechinger store. Company officials call the union "the new Hechinger."
This store will be about 25 percent larger than the now-standard 80,000-square-foot store. The lumber will be displayed in a warehouse on metal racks with low lighting. It will be easily accessible to all shoppers and no longer hidden behind a wall as it is in present Hechinger stores.
Meanwhile, the kitchen and bath departments will be spruced up. Bathroom vanities, for instance, would be displayed in a well-lit area, decorated with hanging plants.
The store will carry housewares, garden products and furniture that are not typically carried in the warehouse stores, but are found in the traditional stores.
All new stores will be built under this concept, while existing stores slowly will be remodeled, under a $16 million campaign, to reflect the company's new look.
Hechinger's disappointing experience with warehouse stores is not unique to the industry. A very popular way of growing two years ago, the warehouse stores have produced disappointing returns, with several of the warehouse do-it-yourself chains reporting large losses.
The entire do-it-yourself industry has been hit with sluggish sales for the past few months, despite a sharp increase in home sales. Hechinger, for its first quarter that ended May 3, reported a sales gain of only 2 percent in stores that have been open for at least one year. The company said sales have improved since then.
Sluggish sales come at the same time the industry is becoming increasingly competitive and aggressive, with regional chains expanding into new cities. Hechinger said it plans to continue its aggressive growth campaign, opening 12 more stores this year.