Home Depot cuts back, exits EXPO
ATLANTA The Home Depot said this morning it will exit its EXPO business and streamline its support functions. The two moves together will cut 7,000 jobs, or about 2 percent of the company's work force.
Describing business at the 34 EXPO Design Centers stores as soft -- even during the recent housing boom -- the company said it did not expect business to pick up for EXPO anytime soon. In the next two months, Home Depot will close the 34 EXPOs, five YardBIRDS stores, two Design Center stores and the seven-location bath remodeling business, HD Bath. These closings will eliminate 5,000 jobs.
"Exiting our EXPO business is a difficult decision, particularly given the hard work and dedication of our associates in that business and the support of our loyal customers," said Frank Blake, Chairman and CEO. "At the same time, it is a necessary decision that will strengthen our core Home Depot business."
Another 2,000 associates will be cut through a restructuring of support functions. According to the company's announcement, this includes continuing its shift to a region- and district-based support model in various field functions and reducing headcount in administrative functions in the company's store support centers.
While the move will lead to a 10 percent reduction in the company's officer's ranks, customer-facing positions will not be reduced, according to today's announcement.
The cutback seems to be in accordance with Blake's effort to simplify the business and focus on retailing basics. The CEO has for more than a year made moral boosting and "aprons on the floor," a corporate mission. (Listen to the podcast HERE.)
While it's not the first shrinking chapter in HD's prolific history of growth -- the company announced 15 store closings in May of 2008 -- the scale of the cutbacks represents the most significant home improvement retrenchment to date for the retailer.
Meanwhile, the company's outlook is grim. It anticipates continued weakness in sales related to the broader economic downturn. Still, the company said it will continue to invest in customer service in its core Home Depot stores, while optimizing its capital allocation. The company plans to reduce capital expenditures to approximately $1 billion in fiscal 2009 and will open 12 stores.
One Home Depot vendor, speaking on condition of anonymity, told HCN that the locations of multiple competitive home centers in the same neighborhoods, -- sometimes the same parking lots -- has taken a toll on the home center business model. "In this environment, you can't have stores that are losing money," he said.
The cutbacks announced today were foreshadowed by two recent corporate decisions. The first was a decision to end a high-profile and longstanding partnership with the United States Olympic Committee. More recently, Home Depot Canada paid $11.5 million to get out of a deal to open a store in downtown Toronto.
The Canadian market, which supports more than 170 Home Depot stores, has struggled of late. But by all accounts, it is in better shape than that of the United States, where home starts hit a new post-war low in December -- a 550,000 seasonally adjusted annual rate.
Another belt-tightening effort takes the form of a salary freeze for all Home Depot officers. Merit increases for non-officer employees, as well as earned bonuses and matching 401K contributions for all employees, including officers, will continue.
"We're very fortunate that the soundness of our company lets us live our value of taking care of our people, even in this time of unprecedented economic hardship," Blake said, in a prepared statement. "These changes will make us a stronger company and will allow us to continue to grow associate employment over the long term to benefit our customers.