Home Depot to close 15 U.S. stores
Nearly 71/2 months after its chief executive said there were no plans to cut the number of its core retail stores, The Home Depot Inc. announced Thursday that it is shuttering 15 of them amid a slumping U.S. economy and housing market. The move will affect 1,300 employees.
Home Depot also says that it has halted efforts to open approximately 50 U.S. stores that have been in its new store pipeline, in some cases for more than 10 years. The Company also said it will record a charge of approximately $400 million related to development costs.
It is the first time the world’s largest home improvement store chain has ever closed a flagship store for performance reasons. Its shares rose almost 5%.
The Atlanta-based company said the underperforming U.S. stores being closed represent less than 1% of its existing stores. They will be shuttered within the next two months.
The stores to be closed consist of three in Wisconsin, two in Ohio, two in New Jersey, two in Indiana and one each in Kentucky, Louisiana, Minnesota, North Dakota, New York and Vermont.
A company spokesman said some of the employees will be relocated, while others could lose their jobs.
Spokesman Ron DeFeo said Home Depot (HD, Fortune 500) has only closed one of its flagship stores previously because of structural damage. Last year, Home Depot closed its 11 Landscape Supply stores. It also has previously shut a number of its Expo design centers.
The company reiterated Thursday its intention to open 55 new retail stores in the 2009 fiscal year.
On Sept. 21, 2007, Home Depot CEO Frank Blake told The Associated Press that the company had no plans to make any broad-based job cuts or reduce the number of its core retail stores in the face of a persistent housing slump that wasn’t expected to improve anytime soon.
Since then, the economy and the housing market woes have grown worse, and Home Depot has announced several rounds of job cuts.
In December, Home Depot said it would cut 950 jobs and close three call centers that handle orders for home installation instant payday loan. The next month, Home Depot said it would cut 500 jobs at its headquarters.
Home Depot has sought over the last year to focus more attention on its core stores. In August 2007, it sold its wholesale distribution business, HD Supply, to a group of private equity firms for $8.5 billion.
Due to the store closings announced Thursday, Home Depot will record a charge of roughly $186 million, including inventory markdowns of $11 million and severance of $8 million. It also will record a charge of roughly $400 million related to development costs and ongoing obligations associated with the future store locations that it is scrapping.
New store capital spending will be reduced by $1 billion over the next three years, Home Depot said.
Excluding charges, the company reiterated that its diluted earnings per share from continuing operations are expected to decline by 19% to 24 for fiscal 2008. Home Depot releases its first-quarter results May 20.
Its shares rose $1.38, or 4.8%, to $30.18 in morning trading.
Home Depot operates 2,258 stores in the United States, Canada, Mexico and China.
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