Home Depot, Eagle Stores Go Head-To-Head In Puyallup

PUYALLUP

A new front in a growing retail war will soon open up here.

Home Depot plans to build a new warehouse home-improvement store just around the corner from a site that Eagle Hardware & Garden has chosen for its own store, near the South Hill Mall.

The rival chains are battling each other to capture the Puget Sound market for hardware and home-decorating products. Eagle, based in Tukwila, has three warehouse stores in the region while Atlanta-based Home Depot has only one store so far, in Tacoma.

Home Depot, the nation's largest home-improvement chain, plans to build 11 more stores in the region and has selected three sites, in Federal Way, Tukwila and Seattle. The Federal Way site is across the street from an Eagle store and the locations in Tukwila and Seattle are not far from Eagle stores.

To Bruce Stevens, marketing director for Renton-based McLendon Hardware, the site selections by Home Depot seem obvious.

"They are targeting Eagle as the closest thing they consider to be a competitor," says Stevens, whose company owns a store about four miles from the South Hill area where Eagle and Home Depot plan their nearly back-to-back stores. But a Home Depot spokesman says the location choice is more circumstantial; both companies put stores where there is a lot of traffic. "A lot of times we don't . . . (put) a store to be close to the other guys," said Jerry Shields. "There are only so many pieces of land in that market to locate on."

Home Depot has not yet closed on the Puyallup site across busy Meridian Avenue East from the South Hill Mall and close to an intersection with Highway 512. If the sale goes through, construction could start this year on the store, but it would probably not open until next year, says Shields.

Eagle has a building permit for its store here, on 37th Avenue Southeast, but has not started construction. The 123,400-square-foot store is targeted for opening in Eagle's third fiscal quarter this year, August through October.

Both Eagle and Home Depot are trying to undercut more established retailers such as Ernst and HomeBase in this area, says John Rogers, a stock analyst with Jensen Securities.

"There is probably room for both (Home Depot and Eagle), but I doubt if there is room for both to be right across the street from each other in 10 locations," he said.

Rogers' biggest concern is how each company could survive predatory pricing. Home Depot's Tacoma store, which opened in January, came into the market with very low prices on some items, such as lumber.

David Heerensperger, Eagle founder and chief executive, told stock analysts last month his company cut prices in its four regional stores to match Home Depot prices, reducing Eagle's gross profit margins.

In documents filed with the Securities and Exchange Commission, Eagle says increased competition could "adversely affect" its sales. Some of its rivals in the market, including Home Depot, have deeper pockets than Eagle, and could more easily afford a bruising price war.

Eagle's ability to expand depends on its current stock offering. The company has filed a registration with the SEC to sell 5.2 million shares of common stock at a maximum price of $18.38 a share. The offering could raise as much as $95 million for the company's expansion plans, which include six stores in Washington, Hawaii and Alberta.

Eagle's store here will be built in the Willows Pond Development, a retail center that will include a Top Foods, a restaurant and a small strip mall. Willows Pond is being developed by TRF Pacific Inc. of Bellevue.

Spokane contractor Harlan Douglass will build the Eagle store. Douglass is a director and shareholder of Eagle. He also owns the Eagle site, which will be leased to Eagle.