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Home Depot: A Successful 180 by 2008?
By Ian Cooper
Let’s hope the post-Nardelli era is under way for Home Depot. Even though the company did hire Lehman Brothers to help it explore strategic alternatives for the $12 billion HD Supply business, the company also noted that it could choose to do nothing at all. The move is a 180 to key strategies under Bob Nardelli, who argued for diversification through wholesale. But some, like Relational Investors, weren’t happy with the move. Instead, Relational argued (and was eventually seated on the Board) that the company should maintain its retail focus of improving disheveled stores and customer service.
The news comes only a year after Home Depot plunked down some $3.5 billion, plus $325 million in debt for Hughes Supply, which Nardelli once called an “ideal strategic and operational fit,” according to reports. At the time, Nardelli even felt that the acquisition would help the company execute its growth strategy to enhance the core business.
To be honest, a move to spin off, or sell the Supply unit would be a good one. It would allow Home Depot to shift its priorities back to retail operations, which have fallen to the wayside amid a weakened housing market, and poor customer service issues. Plus, the funds of the sale could be used to buy back stock – another good move for Home Depot and its exhausted shareholders. This, coupled with the company’s February 26 to 27, 2007 analyst meeting could also provide shareholders with some much-needed insight and upside. As we’ve done with Ceradyne, Realogy, and Apple, we’re recommending that you keep an eye on, or pick up shares of, Home Depot.
Take care,
Ian L. Cooper, Editor, Early Alert Trader