Home Depot to Concentrate on Retail Biz
The sale of its HD Supply business to a group of private equity firms for $10.3 billion means that Home Depot can now focus its efforts entirely on building its retailing empire.
The company, which plans to take the cash from the transaction to use towards a $22.5 billion cash buyback program, issued a statement from CEO Frank Blake.
“Today’s decision reflects our continued commitment to enhancing shareholder value through an exclusive focus on our retail business and the return of cash to our shareholders. This year alone we will spend over $2 billion in support of our top five retail priorities. We are confident in the ability to improve productivity in our retail business through investment in these priorities, which will further enhance returns on invested capital as the investments take hold,” said Mr. Blake.
The five priorities that Mr. Blake referred to include: associate engagement, product excitement, product availability, shopping environment, and own the pro (Home Depot’s program for attracting professional customers). The company has said it intends to spend $2.2 billion this year against those priorities.
Adam Fein, president of Pembroke Consulting, an advisory firm to wholesale distributors, told The Atlanta Journal-Constitution that former Home Depot CEO Robert Nardelli bought a lot of companies to grab share of the wholesale market.
“Home Depot was desperately trying to diversify its customer base and was unsuccessful,” Mr. Fein said. “They lost sight of their core business, chasing this other market.”
Carol Tome, Home Depot’s chief financial officer, said the company was aware of where it needs to work to improve its retailing operations.
“We know we have opportunities there (staffing and customer service), and we’ve been investing in those opportunities,” she said.
Discussion Question: Has Home Depot made a wise move by getting out of the wholesale business? What will an “exclusive focus” on its retail business mean for Home Depot’s associates, customers and suppliers?
- Home Depot puts focus back on retail – The Atlanta Journal-Constitution
- The Home Depot Announces Agreement to Sell HD Supply to Private Equity Group for $10.3 Billion and $22.5 Billion Increase in Share Repurchase Authorization – The Home Depot/PRNewswire-FirstCall via COMTEX News Network
- Five Key Priorities – The Home Depot