Home Depot CEO explains new store slowdown

ATLANTA Home Depot chairman and CEO Frank Blake told a group of investors yesterday that the Atlanta retailer has “dramatically reduced [its] new store pipeline” in order to focus on improving sales and efficiency in its existing stores. Speaking at the Bank of America-Merrill Lynch 2009 Consumer Conference, Blake revealed that the industry’s largest home improvement retailer will open only “a dozen” stores in fiscal 2009, with half of them located in the United States. “We’re going to continue to focus on our existing store base,” Blake said. The company opened approximately 36 U.S. stores in fiscal 2008.

Although the company issued a tough outlook for 2009 -- total sales are predicted to decline 9%, and comp-store sales may dip by the high single digits -- Blake reminded investors that Home Depot generated $5.3 billion in cash during fiscal 2008. The company also took out $1 billion in inventory last year while maintaining high in-stock levels, he reported.

Home Depot will add six to seven RDCs in 2009, Blake said, and complete the revamping of its distribution system by 2010. An SAP operating system, now in use throughout Canada, will be watched closely for the rest of the year.

Analysts asked Blake about Home Depot China, which has not grown beyond the retailer’s original purchase of 12 Home Way stores in August 2007. “It was purposefully a modest start,” Blake said. “While we’re pleased with the basic performance [of the stores], we’re still not confident we have the right business model.”

After listing several differences between the U.S. and Chinese DIY markets -- such as customers, vendor relationships and distribution channels -- Blake concluded that Home Depot “will either figure it out, or we won’t be there.”