Hechinger Co., once the standard by which home-improvement chains were measured, will close its doors for good by the end of the year.
Just three months after filing for Chapter 11 bankruptcy protection, officials of the 88-year-old Largo-based chain said yesterday that its remaining 117 stores would be closed and its assets liquidated to pay off creditors.
The company employed more than 12,000 people.
Hechinger said it will dispose of its inventory through a going-out-of-business sale at its Hechinger, Home Quarters and Builders Square stores, which will begin immediately.
"After a decade of intense competition and continued significant losses, the decision to discontinue operations was the appropriate one," Richard Lynch, Hechinger's chief executive officer, said in a statement.
The decision to liquidate was supported by Hechinger's board of directors and its creditors' committee, the statement said.
For years Hechinger had been losing market share to No. 1 Home Depot Inc. and No. 2 Lowe's Cos. Inc. -- larger, growing and better financed home-improvement chains.
Hechinger's sales continued to decline much more than expected after it sought bankruptcy protection in June, said Don Stallings, Hechinger's president and chief operating officer.
The privately held company listed $1.3 billion in assets and $1.4 billion in liabilities when it filed its Chapter 11 petition at the U.S. Bankruptcy Court in Wilmington, Del.
Before that, Hechinger had announced in February that it would close 34 stores. In June, it added 89 stores to the list.
The company said it intended to focus on a core of 117 stores in 21 states, including nine in the Baltimore area.
As of last week, the company appeared to be on track to keep its remaining stores open. A U.S. bankruptcy judge approved Hechinger's plan to spend $6.3 million to retain its employees.
The deal included improved severance benefits, which would be paid to employees if layoffs occurred at the stores during the Chapter 11 reorganization. At the time, the company said no further layoffs were planned.
Still, for Hechinger to reorganize, "we had to stabilize our sales base. That's the first thing that had to happen," Stallings said. "We were unable to do that.
"There were increasing competitive pressures from companies with greater financial resources," he said, adding that in the past 12 months, its competitors opened more than 120 stores in the same markets with Hechinger stores.
"Customers had brand-new, fresh-looking choices" compared with Hechinger's older models, he said. The company expects to shut down in December, once the liquidation is completed, he said.
The announcement yesterday confirmed suspicions by retail analysts and experts that the company would not be able to re-emerge from bankruptcy, let alone compete.
"Unfortunately, this is no surprise," said Kenneth Gassman, a retail analyst with Davenport & Co. in Richmond, Va. "It's very difficult to turn around a retailer quickly, especially one whose fortunes have been eroding for the last 10 years.
"High-end retailers are successful and discounters are successful. Everyone in between falters, and Hechinger was in between."
Kurt Barnard, president of New Jersey-based Barnard's Retail Trend Report, said the chances that Hechinger would emerge from bankruptcy were "at best, exceedingly slim."
"It's pitiful to see how wrong decisions and poor execution, in some cases, finally brought a fine, old established company to its knees and out of business," Barnard said.
Founded in 1911 by Sidney Hechinger, the company grew from a single shop to one of the premier home-improvement chains in the country, with 128 stores in 24 states and the District of Columbia by the late 1980s.
It was one of the first large-scale home-improvement chains in the nation, and one of the first to build warehouse-size stores for building supplies.
"In the late '70s and early '80s, Hechinger set the standard by which Wall Street measured every other home-improvement chain," said Gassman.
But the company soon lost its footing in the $150 billion home-improvement retailing industry.
Home Depot and Lowe's moved aggressively into Hechinger's markets with bigger, brighter and better-staffed stores. Hechinger's, slow to respond to the challenge, racked up losses, a steep slide in same-store sales and disenchanted customers.
In 1997, the Hechinger family sold the company to a Los Angeles investment firm, Leonard Green & Partners LP. Green merged Hechinger with another troubled home-improvement chain, Builders Square, but kept the company's headquarters in Largo.
The sale kept Hechinger out of bankruptcy at the time, but it did little to improve the company's finances or market share. Hechinger fell to fourth place -- behind Home Depot, Lowe's and Wisconsin-based Menard -- with sales last year of $3.4 billion.
While Home Depot and Lowe's took "big box" home-improvement retailing to a new level by catering to a booming market of do-it-yourself home remodelers, offering variety, low prices and high levels of service, Hechinger suffered a net loss of $228.4 million for the quarter ended April 3, an almost sixfold increase from a year earlier.
"Hechinger simply did all sorts of things to try and stand up to the titans, but it never seemed to hit the right strategy that could accomplish that," said Barnard, the retail newsletter president.
Eighteen months after its takeover by the California buyout firm, Hechinger changed its top executive in March, and again in July.
"Despite its best efforts to turn around, the onslaught of Home Depot and Lowe's were more than Hechinger could withstand," Barnard said.