At­lanta-based Home De­pot grows in new ways

The Atlanta Journal-Constitution - - BUSINESS - By Michael E. Kanell mkanell@ajc.com

The days of build­ing a busi­ness by open­ing scores of stores each year are gone.

But un­like many of the chains mak­ing up re­tail — from Belk to Kmart, from Macy’s to Kohl’s — Home De­pot isn’t clos­ing bunches of them while strug­gling to stay prof­itable. In­stead, the $95 bil­liona-year com­pany has turned to ef­fi­ciency and strat­egy for growth.

Re­tail losses and store shut­ter­ings are a log­i­cal re­sponse to many years of build­ing too many malls and re­tail out­lets, Carol B. Tomé, Home De­pot’s chief fi­nan­cial of­fi­cer, said Tues­day. “Re­tail is over-stored.”

In the mid-1990s, there were 75,000 house­holds for ev­ery large home im­prove­ment store, com­pared to about 30,000 house­holds for ev­ery store now as the num­ber of stores in­creased faster than the pop­u­la­tion, she said.

The At­lanta-based chain — which ex­panded dra­mat­i­cally for sev­eral decades af­ter its found­ing in the late 1970s — has nearly 2,300 stores. At one point be­fore the re­ces­sion of 2007-09, Home De­pot was av­er­ag­ing a new store ev­ery 36 hours.

“We will open one more store this quar­ter,” Tomé said. “We have enough stores.”

Tomé spoke with The At­lanta Journal-Constitution af­ter Tues­day’s morn­ing’s re­lease of the com­pany’s earn­ings re­port, which eas­ily ex­ceeded an­a­lyst ex­pec­ta­tions. For the quar­ter, the com­pany re­ported:

■ rev­enues of $25.03 bil­lion, 8 per­cent higher than a year ago

■ net in­come of $2.17 bil­lion, 10 per­cent above last year

■ an in­crease of 7.9 per­cent in same-store sales com­pared to last year

■ earn­ings of $1.84 a share Prospects are rosy, com­pany of­fi­cials said, pre­dict­ing that sales dur­ing the cur­rent fis­cal year will come in 6.3 per­cent higher than a year ago.

To build a big­ger busi­ness with­out build­ing stores means be­com­ing more ef­fi­cient with both the online and phys­i­cal world of busi­ness, Tomé said. “The web site is be­com­ing the front door of our stores. It is re­ally an in­ter­con­nected ex­pe­ri­ence.”

More than 40 per­cent of online or­ders, for ex­am­ple, are picked up in a store, she said.

At the same time, Home De­pot has been manag­ing in­ven­tory bet­ter — trim­ming the time that items are be­ing un­pro­duc­tively held, get­ting items to the stores quickly and sell­ing them faster.

Gen­er­ally, the more rapid the “in­ven­tory turn,” the bet­ter for the busi­ness, she said. “Re­ally, it’s a mea­sure of health.”

Home De­pot emerged from the re­cent hur­ri­cane sea­son with both in­creased rev­enues and higher costs. The chain had to tem­po­rar­ily close 236 stores in the path of one storm or an­other, but has also sold more storm-re­lated ma­te­ri­als.

The re­sult was $282 mil­lion more in sales and $104 mil­lion more in ex­penses.

With storm re­lated higher costs mostly in the rear-view mir­ror, Home De­pot ex­pects to see a surge of sales dur­ing the hol­i­day sea­son, Tomé said.

Ap­pli­ances do well dur­ing the sea­son, but also lights, dec­o­ra­tions and var­i­ous hard­ware-fla­vored gifts, said. The com­pany also sells about 4 mil­lion Christ­mas trees, Tomé said.

“We sell more Christ­mas trees than any­one on the planet,” she said.

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