Home Depot Inc., one of the nation's largest hardware store chains, said yesterday it is entering the Baltimore market, setting up its first major competition with Landover-based Hechinger Co.

The 137-store Atlanta-based discount warehouse retailer said a 130,000-square-foot store will be opened next summer in Glen Burnie, next to a Price Club membership warehouse and near an existing Hechinger store. Another is set for White Marsh, north of Baltimore, and at least two more are planned by 1993, said Home Depot officials. There are 13 Hechinger stores in the Baltimore area.

The differences between the 116-store Hechinger and Home Depot include price and selection. Hechinger stores typically have higher prices but offer a wider range of merchandise and better service, while Home Depot sells a smaller variety of discounted items in a no-frills warehouse setting. Hechinger's newest expansion vehicle -- the Home Quarters discount warehouse chain -- is similar to Home Depot.

Hechinger executives had no comment about the arrival of Home Depot so close to the company's home territory, where Hechinger reigns as undisputed champion of the do-it-yourself retailers and virtually overwhelms area competitors like Builder's Square and Channel. But Bernard Marcus, Home Depot's chairman and chief executive, said he was looking forward to the imminent face-off.

"We think the market is under-served and expect to do well there," said Marcus. "We think of Hechinger as a fine operation ... but competition is healthy for everybody and with us coming, Hechinger will be a better business and the consumer will be the winner."

Marcus would not say if Home Depot had plans to enter the immediate Washington area, but he predicted that it was inevitable. "Years from now we expect to be in most markets in the Maryland, Virginia, Pennsylvania {areas} and other places there as part of our strategy to increase our presence in the Northeast," he said.

The company has the financial muscle to do it. For the first nine months ended Oct. 28, Home Depot earnings increased 48 percent to $122 million on a 37 percent increase in revenue to $2.8 billion. In contrast, for the nine months ended Nov. 3, Hechinger's earnings were up only 7 percent to $22.5 million on $1.08 billion in sales, an 18 percent increase.

Wall Street has noticed the difference in financial results. Home Depot's stock, traded on the New York Stock Exchange, is selling at nearly its annual high, closing yesterday up 75 cents to $39.25. Hechinger shares, traded over the counter, closed down 12 1/2 cents to $7.13, near its lowest level this year. While Home Depot stock is trading at 31 times the company's earnings per share -- an indication that investors are hot on the stock -- Hechinger is trading at only seven times earnings per share.

How Hechinger will fare with the new challenge from Home Depot is hard to tell because the chain has only competed on a small scale with Home Depot in South Carolina and Connecticut. But, according to industry observers, Hechinger did not fare well against Home Depot in either market.

The Hechinger company's Home Quarters discount chain, considered to be a more aggressive competitor, is set to go head-to-head against Home Depot in Boston in the next few years. Hechinger recently has opened three Home Quarters stores there and plans at least a dozen total, according to company officials. Home Depot has not arrived in Boston yet, giving Home Quarters a jump, but it expects stores to open there within the next two years.

Hechinger also has plans to strengthen its presence in New Jersey, Pennsylvania, Alabama, Kentucky, Tennessee, Ohio and North Carolina in the next two years. Home Depot has a presence in New Jersey, New York and Connecticut and throughout the Sun Belt states, though a majority of the chain's stores are now in California and Florida.

"If you drew a map of the home center world, for the most part, Hechinger and Home Depot have not overlapped in the past, but now this is the first salvo in the battle for Washington," said Peter Keefe, head of research for the Johnston, Lemon & Co. brokerage in Washington. "Home Depot is a formidable competitor and should provide an intense challenge to Hechinger."

Headquarters: Atlanta

Employees: 22,000

Exchange: NYSE

Stores: 137 in 12 states, mostly in California, Florida and Georgia

Revenue (9 months ended Oct. 28): $2.8 billion

Earnings (9 months ended Oct. 28): $122 million Hechinger

Headquarters: Landover

Employees: 15,500

Exchange: OTC

Stores: 116 in 14 states, most around Baltimore and Washington

Revenue (9 months ended Nov. 3): $1.08 billion

Earnings (9 months ended Nov. 3): $22.5 million