Change Begins at Home Depot

The Home Depot (Atlanta), the nation's largest home-improvement retail organization, says it plans to maintain its expansion approach and open 200 new stores in 2003, the same number it opened in 2002.

Despite a difficult year in which the company's stock fell 53 percent (the largest drop among the 30 companies in the Dow Jones Industrial Averages), chairman and ceo Robert Nardelli said, “We're not announcing mass layoffs or store closings because we really believe the fundamentals are in place. It's a matter of execution.”

On Friday, Nardelli ratcheted down the company's sales and earnings projections for its fiscal year 2003, which begins next month. Sales will increase 9 percent to 12 percent, and earnings will increase 9 percent to 14 percent, he said. Last year, Home Depot said it expected earnings to grow at an annual rate of 18-20 percent through 2004 and revenue to grow 15-18 percent.

The retailer's overall sales declined up to 10 percent during December (a period for which it had expected a drop of 3 to 5 percent).

Nardelli said the retailer will increase its capital spending to $4 billion in 2003, up from $3.3 billion last year. That will include spending $250 million to remodel stores. The average Home Depot is five years old, but 26 percent of its 1500 locations are seven years old or older. Home Depot's aging locations have opened the door for its main competitor — Lowe's Companies Inc. (Wilkesboro, N.C.) — to impress shoppers with its newer stores, which often are described as being brighter and having wider aisles.

Home Depot also will slow the growth of its Expo division, which sells high-end home design merchandise. After opening 11 Expo Design Centers last year, it will only open two in 2003, Nardelli said.

To counter the impression that its stores suffer from sagging customer service, Home Depot will invest in technology, increasing the number of stores with self-checkout registers from 45 to 800 by year-end, according to Troy Rice, senior vp of operations. Home Depot also will increase the percentage of its workers who are full time.

Nardelli said the company also needs “to make the stores more shoppable and cleaner. Sometimes you have to step outside the box that's why we have moved aggressively into the appliance business. At the same time, we're not going to go put in 10 or 20 bays of Christmas decoration.”