New Home Depot CEO Blake faces host of challenges
To placate investors, Home Depot Inc Chief Executive Officer Frank Blake added a shareholder to the board and took less pay than his ousted predecessor Robert Nardelli. Now he needs to lure shoppers such as Hilary McDowell.
Home Depot CEO Frank Blake |
"At Home Depot, you spend half your time looking for someone to help," said McDowell, 36, outside a Lowe's in Atlanta. "Here, there's always somebody."
When Blake, 57, makes his first presentation today to investors and analysts since becoming CEO on January 3, they expect him to outline measures that will attract shoppers who have defected to competitors such as Lowe's, based in Mooresville, North Carolina.
They hope to hear strategies for improving store layouts, product availability and employee morale, they said, as well as the usual forecast for annual sales and profit.
"It's time to focus on the stores, so let's see it," said Dan Poole, who helps manage $34 billion including Home Depot shares for National City Corp in Cleveland.
"I don't think people are that worried about increasing costs if it's doing the right things for stores. A little investment is not a bad thing in retail."
Earlier this month, the company reported its first decline in retail sales in four years and a third straight drop in sales at stores open at least a year.
Some of Home Depot's challenges are fueled by a 13 percent drop in US residential construction last year, the biggest annual decline since 1991. Lowe's, the second-largest home-improvement company, reported a 12 percent slump in fourth-quarter profit.
Home Depot customers have been buying and spending less.
The number of retail transactions dropped to 304 million in the fourth quarter from 308 million a year earlier, while the price of the average purchase fell 93 cents to $56.27.
Shares in the company have risen 1.6 percent since Blake took over, trailing the 10 percent gain at Lowe's.
They slumped 7.9 percent during Nardelli's six-year tenure, while Lowe's stock more than tripled. Home Depot, based in Atlanta, ousted Nardelli over the size of his compensation.
Blake, who declined an interview, has already made some changes to boost store sales, like giving each store manager a $3,000 "fun fund" to reward employees as well as more power to make decisions.
Bloomberg News
(China Daily 02/28/2007 page16)
