Home Depot is to close 15 underperforming stores and has scrapped plans to open 50 shops. Spending on opening new stores will be cut by about US$1 billion (£503.3 million) over the next three years.
The move is a further sign that the US housing slump is taking its toll on Home Depot. Planet Retail non-food analyst Greg Hodge said: “In any downturn, homewares retailers are first to suffer and it is not surprising that Home Depot is closing stores and slowing store expansion. It shows it fears for the future.”
The 15 stores represent just 1 per cent of Home Depot’s store portfolio and are in locations such as Indiana, Kentucky and New Jersey. Hodge said: “15 stores is just a drop in the ocean and there could well be more to come.”
Home Depot chief executive Frank Blake said it will continue to invest in existing stores in terms of maintenance, merchandising and other store experience elements. “We put our real estate projects through a tight capital efficiency model,” he said. “This model prioritises locations that make the most efficient use of capital, reduce cannibalisation and drive higher returns. 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.”
The closures affect 1,300 staff, who will be relocated or made redundant. Hodge added: “Home Depot should think carefully about cutting store staff at existing stores, because a lot of retailers that have done that have seen customers turn away because of bad service.”
Home Depot reported fourth-quarter net earnings of US$671 million (£337.7 million). Sales for the same period, covering the three months to February 3, were US$17.7 billion (£8.91 billion), a 1.5 per cent increase on the fourth quarter of the previous year.
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