Builders Square Merging With Hechinger's

Investment firm Leonard Green & Partners is acquiring struggling Builders Square and Hechinger Co. to create the nation's third largest home improvement chain with $4.5 billion in sales and279 stores in 29 states.

Green will pay Kmart Corp. just $10 million cash for Builders Square, but assume $2 billion in lease obligations, and pay $3 a share for Hechinger, or about $124 million plus assumption of $381 million in debt.

Green will own l0o7o of the new firm, although Kmart has the option to purchase a minority interest later.

Once financing has been arranged and assuming no regulatory intervention, Builders Square's headquarters will be moved from San Antonio, Tx., to Hechinger's base in Largo, Md.

The combined firm won't retain current Builders Square or Hechinger's management, but will be run by Anthony Petrillo as acting c.e.o., a retail executive who has worked with Green in turning around other chains.

While many analysts question how combining two under-performers will help rejuvenate either, executives said the merger will at least reduce expenses by eliminating redundant com- puter systems and overlapping stores.

Builders Square's 162 stores in the Midwest and Southwest had 1996 sales of about $2.4 billion. Hechinger Co.'s l17 stores (64 Hechinger's, 52 HQ Warehouses and one Better Spaces) primarily in the Fast and Midwest had 196 sales of about $2.2 billion.

Earlier this year, Los Angeles, Ca.based Green tried to merge Builders Square and HomeBase.

Causeway Expanding North

Looking to position itself in the northbound path of South Florida's growth, Causeway Lumber Co., Fort Lauderdale, Fl., plans to build a lumber disribution center and truss manufacturing plant in Stuart" Fl.

Causeway hopes to begin constnrrction early next year on the $l million complex featuring five buildings totaling 46,800 sq. ft., anticipating a second quarter 1998 start-up.

The five structures represent the first of three phases planned for the next l0 years on the recently-purchased l6-acre site. At full size, the operations may encompass 100,000 sq. ft. of buildings.

Survey Says: Change ESA

More than 70Vo of Americans surveyed favor amending the Endangered Species Act, according to a recent American Forest & Paper Association-sponsored poll.

Only 42Vo favored changing the ESA when similarly polled two years ago.

Respondents cited high costs and underperformance as the major reasons for amending the law.

Over SOVo said the solution lies in making the ESA more inclusive, particularly by requiring sound science to be peer-reviewed, and providing incentives for private landowners to comply.

Customer Retention ls Essential

Keeping customers should take priority over attracting new customers, suggests a recent Consumption Behavior Study by the International Mass Retail Association.

"Retailers need to distinguish their real customers from their 'deal' customers-identify the top 20Vo or 30Vo of loyal customers who shop their store regularly and account for most of their sales, versus the bottom tier who come in once in a while to take advantage of a discount or promotion," explains Brian Woolf, president of Retail Strategy Center, Inc. "Then they need to reward their best shoppers with savings and incentives, as opposed to continually losing money on 'below-cost' customers."

Historically, mass retailing has treated all customers equally, with a "one price for all" strategy, Woolf notes. Yet the study revealed that if a store in which they regularly shop began offering a frequent shopper card, more than half of consumers (547o) would most appreciate a benefit of lower prices on specific products. More than two-fifths (42Vo) said they would most like price reductions on any purchase after making a specified number of purchases.

Yet price is not the overriding factor in consumers' shopping decisions. When asked what is most important, consumers gave the most weight to "I shop more often at stores that make shopping convenient," followed by "Having a complete assortment of choices is important to me." Seeing special tags or information about products on the shelves and speed at the checkout came next in importance, with "To save money, I shop at discount stores whenever I can" ranked fifth.

The study also showed that while retailers seeking to better understand their customers have traditionally looked at buyer behavior-or what customers do in the store-a more meaningful approach is the analysis of consumption behavior-or what they do at home.

"To compete and build loyalty, retailers must know what's in the mind of the customer," says Robert Verdisco, International Mass Retail Association president. "They need to know how consumers live their lives, how patterns cause consumers to buy from one type of retail outlet or another."

Adds Dr. Roger Blackwell, Blackwell Associates: "Firms that only understand buyer behavior may do a good job of selling existing products within existing channels of distribution. But firms that understand consumption behavior are able to create value with new or improved products and distribution channels."