Home Depot cutting 7,000 jobs
No. 1 home improvement retailer exiting its EXPO high-end business.
NEW YORK (CNNMoney.com) -- Home Depot, the No. 1 home improvement retailer, announced Monday that it is shutting down its high-end decor EXPO business and shrinking its support staff, with both moves resulting in a reduction of 7,000 jobs.
Atlanta-based Home Depot (HD, Fortune 500) said the staff cuts impact 2% of its total workforce. The company said the the latest job cuts will not affect any customer service positions in its Home Depot stores.
"Exiting our EXPO business is a difficult decision, particularly given the hard work and dedication of our associates in that business and the support of our loyal customers," Home Depot CEO Frank Blake said in a statement. "At the same time, it is a necessary decision that will strengthen our core Home Depot business."
The company said in a statement that its EXPO business has not performed well financially and is not expected to anytime soon.
"Even during the recent housing boom, it was not a strong business. It has weakened significantly as the demand for big ticket design and decor projects has declined in the current economic environment. Continuing this business would divert focus and resources from the company's core [Home Depot] stores," the statement said.
Over the next two months, the closure of 34 EXPO Design Center stores, five YardBIRDS stores, two Design Center stores and a bath remodeling business known as HD Bath will impact 5,000 jobs, the company said.
Additionally, the retailer said it will reduce support staff, impacting about 2,000 employees and resulting in a 10% reduction in the company's officer ranks.
"A leaner organization has to start at the top," Blake said in a conference call with analysts to discuss Monday's announcement.
Home Depot currently operates 2,274 with a total of 300,000 employees.
"Home Depot's news really reflects what is going on at corporations. Companies have to cut expenses and focus on where they think consumer spending is going to be," said Bill Schultz, chief investment officer with McQueen, Ball & Associates, a firm with over $750 million in assets, including Target (TGT, Fortune 500), Procter & Gamble (PG, Fortune 500) and PepsiCo (PEP, Fortune 500).
"We really need a turn in the housing market to turn the situation around for Home Depot, Lowe's (LOW, Fortune 500) and plenty of other retailers," he said. "These retailers can't really control sales in this environment. So they have to cut back on expenses."
Schultz said he sold his portfolio's $1 million shares in Home Depot about a year ago.
"We were very worried about the softness in the housing market. Home Depot is the leader in the market and they were hit early," Schultz said. "We'll probably take a look at Home Depot again, but not just yet."
Home Depot also announced a salary freeze for all of its officers, although the retailer would continue to offer merit increases to non-officer level staff, earned bonuses and the company's existing 401 (k) matching contribution for all employees, including officers.
The company reiterated its previously announced full-year sales and profit guidance. Home Depot expects sales for the year ending this month to drop by 8% and earnings per share from continuing operations to decline by 24%, excluding charges associated with the latest job cuts and store closings
Analysts expect Home Depot to post full-year profit of $1.73 a share on sales of $71.5 billion, according to Thomson Reuters.
For 2009, Home Depot said it expects continued weakness in sales but that the retailer does not plan to close any of its namesake stores.
The company said it will cut capital expenditure to approximately $1 billion and will open 12 stores.
Blake said the company would look for opportunities to open smaller stores that require lower construction costs that its typical more than 100,000 square feet big-box stores.
Company executives also said during the conference call that half of the new stores will open outside the United States, in Mexico and Canada. Home Depot is not planning to expand on its 12 stores in China in 2009.
Home Depot will report its full-year results on Feb. 24.
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