Home Depot Slows Down Expansion; Still Losing Customers to Lowes
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Home Depot (HD) announced it will no longer pursue
the opening of about 50 U.S. stores it was planning. New
store capital spending will be reduced by approximately $1 billion over
the next three years. Total capital spending for the current fiscal
year is projected to be about $2.3 billion, down from $3.6 billion last
year. Also announced were the closing of 15 underperforming U.S. stores
that do not meet the Company's targeted returns.
Home Depot reiterated that its earnings per share from continuing operations are expected to decline by 19-24% for fiscal 2008. This comes on the heels of the announcement last month of it was getting rid of the "HR Manager" position at each store in favor of a more regional model.
Home Depot needed to do this and, like the HR move, one has to wonder what took so long? For years Home Depot has needed to invest more capital in its dingy locations as it has been consistently losing market share in almost every sales category to the cleaner, brighter Lowe's (LOW) chain.
The savings from these closings ought to go directly into store remodels. If they don't, while HD will see an improvement when the economy improves, it will pale in comparison to what investors in Lowe's will see. The desertion of shoppers from HD to Lowe's will not change just because the housing market does. It will only change when HD gives them a reason to go back.
Disclosure: No position.
Home Depot reiterated that its earnings per share from continuing operations are expected to decline by 19-24% for fiscal 2008. This comes on the heels of the announcement last month of it was getting rid of the "HR Manager" position at each store in favor of a more regional model.Home Depot needed to do this and, like the HR move, one has to wonder what took so long? For years Home Depot has needed to invest more capital in its dingy locations as it has been consistently losing market share in almost every sales category to the cleaner, brighter Lowe's (LOW) chain.
The savings from these closings ought to go directly into store remodels. If they don't, while HD will see an improvement when the economy improves, it will pale in comparison to what investors in Lowe's will see. The desertion of shoppers from HD to Lowe's will not change just because the housing market does. It will only change when HD gives them a reason to go back.
Disclosure: No position.
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This article has 13 comments:
Home Depot stocks almost the same products as Lowe’s, but HD's prices are much lower. If they would get their customer interaction on-track and alter the appearance of their stores, they would be much more successful than Lowe’s could ever hope to be with their outrageously over priced goods and services.
Perhaps the best place to start the overhaul is in the HD corporate hdgtrs. Fire the CEO and all the corporate officers and bring in professionals who are dedicated to their professions and less concerned with enriching themselves.
Nardelli and his clowns have just about destroyed Home Depot, and it shows no signs here locally (SC) that it knows what problems it has. Lowe's isn't perfect by any means, but much easier to work with.
Home Depot stock should tank, and then I might buy some, but for now, Lowe's gets my business and my money.
I prefer to shop Lowes because of the same reasons already stated... cleaner more eye-appealing store, employees who actually help you, and products actually in-stock rather than having to be ordered. HD was the first to come into our town & we were glad to have it. When Lowes came into town about a year later we had been conditioned to believe Lowes was going to be higher priced so we intially avoided it, but it only took a few trips there for things we couldn't find at HD to eventually discover it was a nicer more organized store with much better service.
Does HD want to cater to mainly just the contracting sect, or do they also want the business of the average consumer??
A note to HD: I've now bought 2 refrigerators, a washer/drier, multiple custom window blinds/coverings orders, multiple ceiling fans & light fixtures, etc etc at Lowes. I may not be a BIG customer, but multiply me by thousands. That's a lot of business to let go to the competition just because you have this "warehouse" mentality at HD. Think about it.
business. I'm pretty sure the majority of HD employees are sour and bitter because of the crap management puts them through. I know I worked there 6 years ago. I remember after being there a week in the beginning an Asst. Mgr. came up to me and said, "If you ever pull that Sh-t again, I'll fire your f--king a__." He said that because I told a customer, "If you go get a cart I would be glad to help you load you merchandise." I guess the customer didn't believe they needed to get a cart! That's just one of the mellower stories I have. HD needs to clean up the stores. Find decent management, and please get rid of the day labors in the parking lot. I'm tired of them sitting on my car when I'm in the store shopping. I have never seen a laborer on Lowes property! The day laborers also urinate all over the parking lot . The security guards seem to be amigos with all the day laborers. Maybe the security guards use to be the day laborers. HD treat your employees and customers with respect or you'll go down the tubes just like Kmart.
I'll wait till two or three quarters from now before dipping my toe into the moat surrounding these two big box retailers.
I would like to know sales per square foot and not just comps from one year to the next. From what I have seen, it sounds almost impossible that Lowes is more successful than Home Depot.
I understand that Lowes is growing and successful expansion results in higher percentage profit growth and I understand that Home Depot is a mature company with less opportunity to grow so it's profit growth has to be lower.
I do think that after Arthur Blank and Bernie Marcus left the company, service did decline but I have noticed an improvement since Nardelli left.
I usually shop at the Dahlonega Georgia Home Depot. The service at that store is wonderful. Even the manager gets out on the floor and serves the customers.