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Home Depot will focus on core business

The Home Depot announced in late January that it will close its Expo Design Center business and is also taking steps to streamline its support functions. These decisions will impact 7,000 workers, or approximately 2 percent of the company’s total work force, according to The Home Depot.

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“The Expo business has not performed well financially and is not expected to any time soon,” states the company’s news release. “Even during the recent housing boom, it was not a strong business. It has weakened significantly as the demand for big-ticket design and decor projects has declined in the current economic environment. Continuing this business would divert focus and resources from the company’s core ‘orange box’ stores.”

The company will be closing 34 Expo Design Center stores, five Yardbirds stores, two Design Center stores and a bath remodeling business known as HD Bath, during the next two months.

“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,” says Frank Blake, Home Depot chairman and CEO. “At the same time, it is a necessary decision that will strengthen our core Home Depot business.”

The company also announced it is restructuring support functions to better align the company’s cost structure with the current economic environment. This includes continuing its shift to a region- and district-based support model in various field functions and reducing the number of administrative functions in the company’s store support centers.

The company is also initiating a salary freeze among all officers. It will continue to offer merit increases to non-officer associates, as well as earned bonuses and the company’s existing 401(k) matching contribution for all associates, including officers. The company will offer severance, earned bonuses and other benefits to all impacted associates.

“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 says. “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.”

The company expects fiscal 2008 sales and earnings per share from continuing operations to decline by 8 percent and 24 percent, respectively, before the charge associated with the Jan. 26 announcement and the store rationalization charge recognized earlier in the year related to its sale of HD Supply.

Looking forward, the company anticipates continued weakness in sales related to the broader economic downturn, but 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.

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This article originally appeared in the March 2009 issue.

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