The Home Depot, which just two years ago declared "Own the Pro" as one of its five business priorities, released today a three-item list of strategic priorities that omits any specific reference to the professional builder/remodeler. A company spokesman told ProSales later that the omission shouldn't be taken as an implication that the Home Depot is abandoning that subgroup. The retail giant also brightened slightly its gloomy earnings forecast for the year.
Home Depot executives said the company's strategy now involves:
- Customer service "anchored on the principles of taking care of associates, putting customers first and simplifying the business."
- "Product authority," which The Home Depot said "includes an emphasis on re-establishing a merchandising driven business, providing product that meets customer project needs, and building tools for effective implementation."
- Productivity and efficiency, which the company said "will be achieved through disciplined capital allocation focused on the existing core retail business, transforming the supply chain and improving information technology." It said future emphasis will be on getting more sales from existing stores rather than pushing to build new ones.
These strategic priorities differ from the five business priorities that the Home Depot was following as 2008. In that document, the company stated: "The Home Depot's goal is to be the number one destination for pro customers, primarily repair and remodel professionals." The goal was based on the fact that, according to Home Depot executives, roughly 3% of the company's customer base accounted for 30% of all sales. To serve this group, the company said it would employ pro-oriented sales managers and a centralized team that could process large, competitive quotes.
In contrast, during a presentation to analysts and others today, none of the company's presentations on strategy, merchandising, or store operations mentioned pros specifically except to note how company research revealed how and when the pro shopped and what the pro tended to buy.
But observers shouldn't infer from this that the Home Depot doesn't want to be the No. 1 destination for pros anymore, a spokesman for the Atlanta-based company said. He noted that the pro desks and centralized quote-handling teams remain in place. When asked what the company was doing in its new strategy to specifically serve the pro, the spokesman said the company's attempts to serve the pro, the do-it-yourself customer and the "do it for me" customer will be reflected throughout the store. "Whether it's customer service, pricing, in-stock [goods] ... all are done to the benefit of the customer," the spokesman said. He called today's announcement an "evolution" built on the five business priorities.
The Home Depot has ratcheted down its special involvement in the pro sector over the past few years. Most notably, it sold its HD Supply subdivision to a private equity group, which in turn sold the lumber and building materials subgroup to ProBuild. The company also hasn't cited its "own the pro" business priority in its recent quarterly earnings calls to analysts.
Aside from revealing the new strategy, The Home Depot also updated slightly its earnings guidance. The company said it now expects earnings per share from continuing operations to be flat to down 7% from the previous fiscal year. That's slightly better than the definite 7% drop the company had previously forecast.
In addition, The Home Depot said it expects earnings per share from continuing operations to decline 20% to 26%. Previously, it had forecast a 26% decline.
"The company still expects sales to decline by approximately 9%, comparable store sales to be high single-digit negative and for gross margin expansion to be flat to slightly positive," the company said.
The Home Depot has 2,238 retail stores in North America and China. It had sales of $71.3 billion and earnings from continuing operations of $2.3 billion in fiscal 2008, which ended Feb. 28, 2009.