The sluggish global economy compelled the world's largest home
The Home Depot Inc
) to come up with the decision of closing down its remaining seven
big box stores in China. However, the company will operate in the
country through its two specialty stores and e-commerce facility.
This action is going to affect approximately 850 associates of the
Home Depot is anticipating incurring an after-tax charge of
about $160 million or 10 cents per share towards store closure
expenses, lease termination, impairment of goodwill and other
assets. Further, excluding the abovementioned charges, the company
continues to expect earnings per share of $2.95 in fiscal 2012. It
will continue to employ nearly 170 associates in China for its
sourcing offices and specialty stores.
During late 2006, Home Depot made its first ever global presence
by acquiring the twelve-store Chinese retail chain - The Home Way.
The company lately realized that China is a do-it-for-me market and
not a do-it-yourself market. Consequently, Home Depot has now
adjusted its business concept accordingly. Home Depot believes that
the new store format and e-commerce websites are made according to
the Chinese customers' needs and preferences.
Lately, Home Depot reported a better-than-expected financial
result for the second-quarter of fiscal 2012. The company's
earnings for the quarter came in at $1.01 per share, climbing 17.4%
from the prior-period earnings of 86 cents, primarily driven by
comparable-sales growth and strong operating performance. Moreover,
net sales inched up 1.7% to $20,570 million compared with $20,232
million in the prior-year quarter.
Home Depot is a leading player in the highly-fragmented home
improvement industry. The company has implemented significant
changes to its store operations to make these simpler and more
customer-friendly. In addition, the company has reinvigorated
itself with a shift in focus from new square footage growth to
maximization of productivity through its existing store base. We
believe these initiatives will induce more customer traffic to its
stores while boosting its top line.
Moreover, with the introduction of new warehousing and
transportation system, the company has been able to improve its
supply chain while minimizing cost. Further, this has facilitated
Home Depot to improve its Central Automated Replenishment System
for immediate refilling of stock while reducing its investment in
However, the company's business is highly competitive, primarily
based on customer services, price, store location and assortment of
merchandise. It faces stiff competition from local, regional and
international players as well. To maintain its market share, the
company is making selective acquisitions and strategic alliances
with third parties, which are increasing its operational risks.
Home Depot, which competes with
Lowe's Companies Inc.
), currently has a Zacks #2 Rank, implying a short-term Buy
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