Home Depot to Close 15 Stores, Slow Expansion

Home Depot to Close 15 Stores, Slow Expansion
May 02, 2008

Atlanta-based The Home Depot Inc. updated its plans for square footage growth, announcing that it will close stores and curb expansion. The strategic plan outlined centers on the company's capital efficiency model to improve free cash flow, provide stronger returns and invest in its existing stores to continue improving the customer experience. For the current fiscal year, the company reiterated its intention to open 55 new stores, including 36 new stores in the United States. Starting in the 2009 fiscal year, Home Depot intends to grow square footage by approximately 1.5 percent per year. Home Depot said it has determined that it will no longer pursue the opening of approximately 50 U.S. stores that have been in its new store pipeline, in some cases for more than 10 years. Accordingly, the company will record a charge of approximately $400 million related to capitalized development costs and ongoing obligations associated with those future store locations. Aggregate new store capital spending will be reduced by approximately $1 billion over the next three years. The company reported that its total capital spending for the current fiscal year is projected to be approximately $2.3 billion, down from $3.6 billion last year. Following an evaluation of its store portfolio, Home Depot will close 15 underperforming U.S. stores that do not meet the company's targeted returns. These closings, which are focused mostly in the Northeast and Midwest, will impact approximately 1,300 associates. As a result of the store closings and impairment, the company will record a charge of approximately $186 million, including inventory markdowns of $11 million and severance of $8 million. "This is a continuation of our disciplined approach to capital allocation that we outlined last year," said Frank Blake, chairman and CEO. "We will invest in our core retail business, in this case our existing stores, which drive our most profitable sales." Home Depot currently has 1,970 U.S. stores.