As an Atlanta Journal-Constitution article points out, 2008 has been a bad year for Home Depot and there's still a long way to go. Yesterday, the chain followed up previous steps that included corporate layoffs and scaled back capital investment plans with an announcement that it was closing 15 underperforming stores and no longer pursuing 50 locations in its pipeline for future expansion.
"Closing a store is always a difficult decision because it affects both our people and our communities," Home Depot CEO Frank Blake said in a press release. "But, as with our decision to slow future store growth, this is the right decision and will bring long-term benefits to our associates and to our shareholders. ... By building fewer stores, in the best locations, and making sure our existing stores are profitable, our company will be in a much stronger competitive position."
Home Depot does intend to continue with its investment plans to improve merchandise selection and the shopping experience in existing stores. It also intends to go ahead with opening 55 new locations with 36 of those in the U.S.
Zahid Siddique, a building products analyst with Gabelli & Co., questioned Home Depot's strategy. "Demand will remain somewhat depressed for the next several years, especially in the U.S. I don't think there's really any incremental benefit from opening these new stores," he told Forbes.com.
Home Depot is not alone in dealing with the housing crunch. Its chief rival, Lowe's, announced in March that it was delaying the opening of 20 new stores in response to market conditions.
Discussion Questions: Does Home Depot have the right plan in place to get through current challenges and come out stronger when the economy rebounds? What gives you the most cause for optimism and/or pessimism based on what you're seeing take place?