Home Depot to close 15 underperforming US stores

ATLANTA — It's been 4 1/2 years since former Home Depot Chief Executive Bob Nardelli's bold prediction that the home improvement retailer could sustain "unlimited growth" without significantly affecting sales at established stores.

That statement was made during much better economic times.

The Atlanta-based company, under different leadership, a different growth philosophy and amid an ailing housing market, put the brakes Thursday on some of its future expansion plans and said it would do what was previously unthinkable _ close 15 of its underperforming flagship stores.

It is the first time the world's largest home improvement store chain has ever closed a flagship store for performance reasons. The move, to be completed within the next two months, will affect 1,300 employees.

The company reiterated its intention to open 55 new stores in the 2009 fiscal year, though it will no longer pursue the opening of roughly 50 U.S. stores that have been in its new store pipeline, in some cases for more than 10 years.

"By building fewer stores, in the best locations, and making sure our existing stores are profitable, our company will be in a much stronger competitive position," said CEO Frank Blake, who took over for Nardelli in January 2007.

Home Depot shares rose $1.07, or 3.7 percent, to close at $29.87.

Nardelli, now the chief at automaker Chrysler LLC, had other ideas on Nov. 18, 2003, when he told The Associated Press that The Home Depot Inc.'s robust new store growth would continue unabated and suggested the retailer may one day expand into Europe and Asia.

The company has added about 600 stores since then, but has scaled back new store growth in the last few years. Its only stores outside North America are a dozen in China, and those were obtained through an acquisition.

Some analysts and large investors have worried in the past that as Home Depot gets bigger, it would invariably put stores in direct competition with existing stores, a practice known in the industry as cannibalization.

Home Depot in the past has justified cannibalization by saying it increases the company's overall market share.

On Thursday, Blake said Home Depot's goal now is to "reduce cannibalization and drive higher returns."

Growth aside, Home Depot previously had never closed one of its flagship stores for performance reasons.

On Sept. 21, 2007, Blake told AP that the company had no plans to make any broad-based job cuts or reduce the number of its core retail stores in the face of a persistent housing slump that wasn't expected to improve anytime soon.

But since then, the economy and the housing market woes have grown worse, and Home Depot has announced several rounds of job cuts.

In December, Home Depot said it would cut 950 jobs and close three call centers that handle orders for home installation. The next month, Home Depot said it would cut 500 jobs at its headquarters.

Home Depot has sought over the last year to focus more attention on its core stores. In August 2007, it sold its wholesale distribution business, HD Supply, to a group of private equity firms for $8.5 billion.

The stores Home Depot said Thursday it plans to close consist of three in Wisconsin, two in Ohio, two in New Jersey, two in Indiana and one each in Kentucky, Louisiana, Minnesota, North Dakota, New York and Vermont.

A company spokesman said some of the affected employees will be relocated, while others could lose their jobs.

Spokesman Ron DeFeo said Home Depot has only closed one of its flagship stores previously because of structural damage. Last year, Home Depot closed its 11 Landscape Supply stores. It also has previously shut a number of its Expo design centers.

Due to the store closings announced Thursday, Home Depot will record a charge of roughly $186 million, including inventory markdowns of $11 million and severance of $8 million. It also will record a charge of roughly $400 million related to development costs and ongoing obligations associated with the future store locations that it is scrapping.

New store capital spending will be reduced by $1 billion over the next three years, Home Depot said.

Excluding charges, the company reiterated that its diluted earnings per share from continuing operations are expected to decline by 19 percent to 24 for fiscal 2008. Home Depot releases its first-quarter results May 20.

Home Depot operates 2,258 stores in the United States, Canada, Mexico and China.

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On the Net:

The Home Depot Inc.: http://www.homedepot.com

Comments

[Reio2288]

I wish all the home depots would close. Big business is killing america and punishing the working class. I'll bet no executive took a pay cut or got laid off. I'll bet the profits from this blood sucking parasite are just fine. They wont miss a penny. Home Depot has one of the nations worst records for employee abuse. If they closed and other big business blood suckers did as well, the working class would recover and be better off without these greed driven %#@&*. Dear Home Depot, I wish you ALL the Worst. Don't shop there Don't work there NEVER WILL. Big Business is solely responsible for turning america into a third world country. With places like home depot soon I'll be tring to sneak across the border to mexico for opportunity.

[willo]

Better do your home improvement's before the value of the dollar is gone altogether. Oil, at $120+ a barrel, and every item in the store either made out of it, or used extensively in it's manufacturing and distribution, are going to skyrocket. We are way over built with frachise stores.
I would suggest either getting some farmland or moving close to where you work.

[CaptainHowdy]

Written by Jack Bernstein back in 1985...

http://www.jackbernstein.org/

As the collapse of Israel draws near, one of two courses of action by the New York/Moscow/Tel Aviv Triangle is likely to be taken:

1. Israel could trigger a large scale Mideast war, a large war which Israel could not win alone. Then the New York leg of the New York/Moscow/Tel Aviv Triangle would use its influence on the U.S. Government to send U.S. military forces to aid Israel.

----------

At some point during the war, when the U.S. military is deeply involved and the U.S. citizens demoralized, the Zionist oriented Jewish International Bankers will make their move. Evidence leads to the conclusion that it is these bankers who own the Class A Stock of the U.S. Federal Reserve, America's central bank. In this position of power, these Zionist bankers, can, and likely will, trigger an economic collapse in America " like they did in 1929 when they caused the stock market crash and started the severe depression of the 1930's.

[anastasiabeaverhousen]

Excuse my schadenfreude for a moment but I have to enjoy it...........................ok.

These rotten republican bastards support bush tooth and nail. The fact that they are being hoisted on their own petard is simply delicious.

Perhaps if you'd supported Democrats, who historically have created and sustained good economies, you might not have to close your stores. Instead, you sided with fascist freaks who have caused you this grief. I hope it costs you double. Eat cake.

[Chemwiz]

Sounds like someone needs to move back to Russia

[TommyBobama]

BDS attack.

[retreadite]

I'm sure no demmies worked at Home Depot. Do you think Langone and Blank are sweating the fact that they're closing a few stores?

Partisanship gone crazy.

Just spit on the poor HD employees because their owners support repubs. Nice. Very nice.

[Chemwiz]

Thats what happens when you fall from #1 to #6 in the home improvement store catagory...I've never even heard of 3 of the chains, but they're better than Home Depot, says consumers.

[rh654]

Bob Nardelli was not an effective CEO - unfortunately as is too often the case the top person gets millions for poor performance while the people down below eventually get the shaft.

[taoist]

I also belive this is just the start of a snowball. I live in Nor Cal. and have 4 stores within 3 miles. Really does not matter anyway since the service in all of them sucks.

[TommyBobama]

Home Depot is another victim of Home Depot service. Their stores are fine for contractors or for shoppers who know exactly what they are looking for. Unfortunately for the basic home improvement shopper the lack of customer help and poor service is discouraging. Home Depot just doesn't want their business or their money.

Lowe's is just better. Not much, but better. Shopping at Home Depot is not worth the annoyance. They will not be missed.

[MilwaukeeDan]

The stores are not "underperforming", it's "the customers don't have money" or "are not willing to invest it in the white elephant"(thanks VZ). These places did great when all the house flipping and building was going on, that's over. According to the Census Buureau, there are a record 2.28 million vacant homes. People are not buying because they don't know where the bottom is. Some where buying just to make money, now they can't, so they wont. I follow the market here very closely, houses are not selling unless the owners(debtors) are dropping prices to give them away. When the market was hot, you could sell an older(1960s,1970s) if you remodeled the kitchen and bath(Home Depot). Now, no one wants these homes, they can buy new for the same price with a better and modern floor plan. It's not worth remodeling any longer, there is a older house in my neighborhood that the owners invested $40,000! in the kitchen alone. The husbands job got relocated and they are desperate to sell, they can't even get what they paid for the place and forget about the kitchen investment. Later Home Depot, won't miss you.

[VivaZapata]

This is just the beginning. As the housing crisis deepens and people realize upgrading their homes won't mean a thing in terms of getting rid of the white elephants, Lowes and Home Depot will be closing in greater numbers. Walmart will be happy to buy them out, but they too will feel the pinch before too long.

[gevan]

Would it hurt to be more specific about which stores are slated for closing? "Two in New Jersey" is a little vague.

[dropthedh]

http://www.app.com/apps/pbcs.dll/article?AID=/20080501/BUSINESS/80501026

Here is a link about the locations.

[ErnestineBass]

More Nardelli fallout.

[Rule Of Law]

When folks stop buying new cars and start fixing their old ones, times are tough. When folks stop buying houses AND stop fixing up the ones that they live in, times are scary.