Eagle Has Landed -- Hardware Heavyweight Weighs In For Battle Of Home Centers

The store will stock 152 type of hammers, 1,400 kinds of lights and 8,100 kinds of fasteners ranging from screws small enough to fix eyeglasses to a $30 bolt that could be used to repair an industrial power generator.

There will also be 9,000 square-feet of space of kitchen and bathroom showrooms - some showers will be plumbed so customers can see how the shower heads work - a lumberyard, garden supplies, washers and dryers, wallpaper, lawn mowers and barbecues.

David Heerensperger, founder, president and chief executive officer of Eagle Hardware & Garden which will open its first Seattle-area store in August, says his concept calls for one-stop, warehouse shopping for everyone from weekend remodelers to professional contractors.

"People are tired of going to three or four places for their kitchen remodel. They have to go to Pay 'N Pak for cabinets, someplace else for wallpaper and then they buy their appliances from the wild guy on TV. What we're doing is having a home show every day with warehouse prices day in and day out," says Heerensperger, 55, who used to head rival Pay 'N Pak.

The 119,000 square-foot store in Tukwila will be Eagle's second location. A 106,000-square foot store opened in Spokane in November.

In Seattle, where longtime Seattle chains Ernst Home Centers and Pay 'N Pak Home Centers already are fighting for market share against HomeClub, a Los Angeles-based warehouse chain, industry observers say that Eagle will be a tough competitor.

"One of the opportunities for Eagle is that two of their competitors, Ernst and Pay 'N Pak, aren't setting anything on fire," said Jeff Atkin, partner in Kunath Karren Rinne & Atkin, a Seattle investment firm which has invested in Eagle on behalf of clients. "Eagle is going to take market share away from everybody."

Business in Spokane has been so strong, says Heerensperger, that he has revised his first year target of $15 million in sales to at least $22 million. The store turned a profit in its first month and has captured a 30 percent share of the local home-improvement supply business.

Heerensperger, the brash, outspoken former chairman and chief executive officer of of Pay 'N Pak, has apparently had little trouble convincing investors that the Northwest is ripe for his concept, which he likes to describe as the best of Pay 'N Pak, McLendon Hardware, (a Renton-based chain known for its vast inventory of hardware), and Costco, with a Nordstrom approach to service.

He raised $4.5 million through a private placement offering a year ago and will tomorrow close on another private offering of $14 million. Heerensperger also put $3.5 million of his own money into Eagle.

Investors who are on his board include Seattle developer Herman Sarkowsky, Spokane developer Harlan Douglass, former Pay 'N Pak director Marshall Weigel, and representatives of two venture capital firms, Bessemer Venture Partners, of Boston, and Walden Venture Capital, of San Francisco.

In addition to the Tukwila store, Heerensperger plans to open a Bremerton warehouse in mid-October, and a Yakima location in December. Deals have already been made to acquire locations in Federal Way and Anchorage, he said, "and we're working on something in downtown Seattle and the Eastside, both to open in '92."

Heerensperger expects to have 14 stores in the West by late 1995 and be doing $300 million in annual sales. All of them will be warehouse-style stores of 100,000 to 120,000 square feet since Heerensperger believes that the successes in the last decade of warehouse retailers such as Costco have proven that customers like one-stop, low-priced shopping.

"I saw this trend in focus groups five to six years ago," he said. "You just can't catch the customer in a small store now, it's the wrong-sized fishing boat."

To support Eagle's promotional slogan of offering "more of everything," Heerensperger says each warehouse stocks 50,000 inventory categories. Although demand is rare for such items as the $30 industrial generator bolt and fire-hydrant sized hose, Heerensperger says that such "oddball stuff is good for our image. It tells people we stock it all."

Competitors, however, say they doubt Eagle's tactics will be enough to win it a large chunk of the market.

Monty Reese, Ernst senior vice-president of marketing and advertising, agrees that Eagle "does carry more stuff than any other home center I've seen. . . . But we feel we carry a broad enough range for the average consumer."

Reese added that Ernst will not change its merchandising and marketing strategy - which includes the promise of beating competitors' prices by 5 percent. "To say that we're going to carry everything that someone else carries, no, we're not."

An aggressive advertising campaign launched in Spokane compared Eagle's prices item by item with Ernst, Pay 'N Pak, HomeClub and Ziegler, a Spokane lumber yard. Heerensperger says he will use the same guerrilla tactics here. As is the case with warehouse clubs, Eagle's prices will not swing up and down for special promotions, he said, thereby cutting the labor costs associated with constantly changing prices. Eagle charges no membership fee.

Heerensperger's strategy also calls for offering the kind of customer service that might be found in a neighborhood store along with the kind of consulting services offered by upscale home decor showrooms.

Computer-trained employees help customers create computer-aided design solutions for their remodeling projects, and the stores employ professional interior decorators.

Stores open at 7:30 a.m. to accommodate contractors, with special check out counters and a side entrance reserved for their use.

"At 7:30 the contractors come in to get their lumber," Heerensperger said. "At about 10, the retired people come in. The women and do-it-yourselfers come in the afternoon and around 6:30 p.m. the yuppies come in and get their remodeling ideas."

Heerensperger left Pay 'N Pak in August, 1989, two years after he and an investor group financed by Citicorp's venture capital department fought off a hostile takeover attempt by Paul Bilzerian. The Florida speculator was later convicted of securities and tax fraud in connection with numerous takeover attempts.

At the time, Heerensperger said he wanted to slow down after a 29-year career in the home improvement business. He had started his own hardware store - called Eagle - in Spokane at age 24. It was acquired by Pay 'N Pak in 1969.

But within a week after leaving Pay 'N Pak, he was at a Chicago home center show picking up ideas. Although his severance package with Pay 'N Pak prohibited him from hiring away Pay 'N Pak managers for three years, his agreement did not prohibit him from starting a competing business.

Until August, Heerensperger will spend much of his time shuttling between a rented Kent office that now serves as his corporate headquarters, and the new store. A self-described "do-it-yourselfer" and the son of a Longview carpenter, Heerensperger easily slips into construction talk during impromptu conferences with his building crew.

Until August, Heerensperger will spend much of his time shuttling between a rented Tukwila office that now serves as his corporate headquarters, and the new store. A self-described "do-it-yourselfer" and the son of a Longview carpenter, Heerensperger easily slips into construction talk during impromptu conferences with his building crew.

But when he discusses his long-term blueprint for Eagle - which includes making an initial public offering (IPO) - he talks dollars and cents.

"As the corporation grows we'll need money and we're in the right industry. The warehouse format is the darling of Wall Street."

He said Eagle's success in Spokane would have a a successful public stock possible now, but he wanted to continue to maximize future returns for his original investors.

He and his family will control just under 45 percent of the stock after the second placement closes. "So we'll probably (take it public) in two to three years instead.

"A lot depends on the market," Heerensperger said. "But if Seattle is as good as Spokane, it's gonna be a slam-dunk IPO."

Retailing is a regular feature in the Business Monday section of The Seattle Times.

EAGLE HARDWARE & GARDEN

-- Headquarters: Tukwila

-- Store locations: Spokane, Tukwila (opening Aug. 1)

-- President: David Heerensperger

-- Type of business: home improvement centers