Home Depot focuses on Retailing

Results Better Than Expected

Home Depot's better than expected results, given the fact that the economy really isn't growing, shows that the management focus on it's core retailing base is starting to pay off. The forays away from the core home retailing business are over.

The home improvement and "DIY" sectors of the economy have taken a big hot, along with the housing market and decrease in home values. People are fixing what needs repaired or replaced, but really aren't, in most markets, making the big home improvement purchases right now.
Lowes and other home improvement retailers and suppliers are all experiencing the downturn in the housing market firsthand.

There's too much uncertainty in the future course and timing of economic recovery for people to feel comfortable about big discretionary expenditures. So, going back to the basics of good service and knowledgeable associates to assist their customers will pay off in the long run. Working on improving the in store experience for their customers is a great strategy.

They have closed the Expo design centers, are serious about cost controls, and management is really concentrating on being the best home improvement retailer they can be. As long as they continue to look at efficiencies and increasing per square foot sales, the things HD’s management can control, it bodes well for future results.

As long as they stay focused on that very worthwhile goal, HD will come through the balance of the recession poised for renewed growth.

Home Depot and Customer Service haven't gone together for awhile

Source Article: Home Depot Retrains Cashiers, Shelf Stockers in Turnaround Push | www.bloomberg.com (view article)


Implications:
1) Home Depot grew from it's inception by using skilled associates

2) Service became a lower focus as they grew

3) Focusing on being a retailer again is good long-term strategy


Analysis:

Home Depot focusing on Customer service is a good thing both for the customers and the firm.

As the economy stays in the doldrums, more and more people who wouldn't have dreamed of "DIY" before will be thinking about doing things around the home and garden themselves. A Customer Service emphasis and associates who can provide knowledge for nervous novices is where this company can really take off.

This is where Home Depot originally grew, and where they need to be again to get the business growing in these troubled times.

THD strayed far from it's retailing roots under the prior management, led by Mr. Nardelli. Concentration on doing all the little things right, keeping the stores in stock on promo and fast moving items, making sure there are enough associates with knowledge available to make the customer experience a pleasant one.

Lowe's has been winning the customer in-store experience recently, so to see a momentum swing back to Home Depot, in a tough retail climate, shows the tough initiatives and focus on retailing are starting to bear fruit

Home Depot Cuts: Getting Back to Core Business Good Idea

Source Article: Home Depot will cut 7,000 jobs, exit Expo division (Bloomberg.com)

(Read Source Article)

Implications:

1) Home Depot has been "De-conglomerating" itself since Nardelli departure

2) Back to "Category leader" business model instead of trying to be next GE

3) Emphasis on core DIY business, better service will yield dividends down the road


Commentary:

Home Depot built itself to the leader in the Home-Improvement and DIY field by being a very good retailer who followed a focused and simple business plan: If people felt as though they could do things themselves, they would attempt to do so if they knew they could get help and advice. The Corner hardware store, "Supersized" as it were.

The purchase of builders supply firms, infrastructure suppliers, and branching out into high end home decor just subtracted from the focus that had made them successful. Diversification, on the consumer perception side, has its limits. The shedding of the acquired businesses and non-core retail concepts will allow THD concentrate on the standard stores and customer experience there.

McDonalds can sell you a salad or a chicken sandwich with relative ease, but they don't try to sell you cedar-plank salmon or chateaubriand. Even if the restaurants could prepare them successfully, it's too much of a stretch for consumers to be comfortable with.

Home Depot is back to being what is has always successfully been, the leader in home-improvement retailing. The renewed emphasis on in-store experience, which had slipped in recent years, is good for both for now and down the road.

Lowe's impressive growth has shown people wanted a good alternative to THD, and they have taken leadership in items such as appliances.

Home Depot shedding the rest of the "distractions" and getting down to retailing again bodes well for the firm in the long run.

Trying to be a new version of GE wasn't a good strategy; being what they were when they grew the financial strength and market share to attempt to emulate GE IS a good idea.