(MONEY Magazine) – Twenty-one years ago, Arthur Blank was fired as an executive at Handy Dan Home Improvement Centers. Blank, who'd lost out in a management squabble, quickly joined forces with Bernie Marcus, a fellow refugee from Handy Dan. They founded a home improvement firm of their own, opening their first stores in Atlanta. The name of their new company? Home Depot.

Today, Blank and Marcus are billionaires, and Home Depot has become a mecca for homeowners. It boasts 879 stores, with total sales of about $40 billion. Every day legions of do-it-yourselfers and contractors flock to its cavernous 125,000-square-foot stores, loading up their oversize shopping carts with everything from cordless power tools and ceiling fans to houseplants. Handy Dan, meanwhile, went bust years ago.

Home Depot has grown at a remarkable clip. Earnings have risen at least 20% a year for the past decade, and the stock has soared. At a recent $69.75, it's up more than 300% in the past two years. If you'd invested $1,000 when Home Depot went public in 1981, your stake would now be worth more than $1.4 million.

Blank, who took over from Marcus as CEO in 1997, insists that there's room for lots more growth. He wants to open nearly 1,000 new stores by 2003, mostly using Home Depot's traditional superstore format. He's also gambling on newer concepts, including a chain of Expo Design Centers that sells kitchens and bathrooms. He's testing a chain of outlets called Villager's Hardware that resemble the smaller mom-and-pop stores that Home Depot has helped push out of business. And he's expanding his empire overseas, initially in Latin America. Just back from Chile, where Home Depot recently opened its third store, Blank spoke with MONEY writer Sarah Rose about the future of his retail Goliath.

Q. Looking back on the past 20 years, do you take credit for making us a nation of do-it-yourselfers?

A. What we would take credit for is putting a completely different spin on the home improvement center business, bringing it to a level it just wasn't at before. We basically leapfrogged our competition by at least five to seven years by opening up stores that were twice the size of anybody else's in the industry, having prices that were 25% less, putting more people on the sales floor and having significantly more product.

Q. Your stock has surged in the past three years. What's driven this performance?

A. The company has been performing at extraordinarily high levels for a number of years. The earnings record has not only been strong but very consistent. And now all of the demographics that support our industry are very strong. You have an industry that's growing anywhere from 5% to 8% a year. At the same time, there's a lot of consolidation taking place. A lot of companies have not made it.

Q. How can you possibly sustain your breakneck growth?

A. We see a lot of running room ahead of us. This year we'll do, let's say, in the range of about $40 billion in volume. And during 1998 there was $408 billion of building material sold in the U.S. and Canada. So there are all kinds of growth opportunities here and also beyond the borders of the U.S. and Canada. We've had great success with our store openings in San Juan, Puerto Rico, and we're opening up five stores next year in Buenos Aires.

Q. How do you keep prices down and still boost profits?

A. We avoid the middleman; our stores are essentially warehouses that are open to the public. Also, when you do close to $40 billion in volume, you can negotiate the right kinds of prices from your suppliers. We've taken a lot of cost out of the product through regular reviews with these vendors. And we operate the company in a very efficient way.

Q. You trumpet your customer service, but isn't it difficult to hire quality staff in such a tight labor market?

A. It's been difficult, but it's not been very difficult. A lot of people are looking for exactly the kind of environment we can offer. We pay people probably 20% above the marketplace, and we have a variety of stock programs. People are looking for an opportunity to become part of something that offers them the opportunity for personal growth. Over 70% of the folks who are running our stores never went to college. A very large percentage of those people started as sales associates, as cashiers, as lot engineers.

Q. What's been the major challenge for you since you became CEO in 1997?

A. Up until several years ago, essentially all of our growth was in the traditional stores. While that's going to be the pattern by and large, with international growth and with Expo and with Villager's, our business today is much more complicated than it's been in the past. I've prepared the company to continue with a much more complex business model than we've had before.

Q. Is the Internet a threat or a boon to Home Depot?

A. To me, the Internet is really just another way that our customers are going to choose to shop with us. Probably in the second quarter of next year we'll be making the entire store available on the Internet. We'll be able to deliver an order to the customer if that's what they want or provide it in the store so they can come by and pick it up. Having the 879 stores, going on close to 2,000 stores in the next 2 1/2 years, we have that many fulfillment centers.

Q. What keeps you up at night? Fear of a recession, or of rivals like Lowe's?

A. What probably keeps me up at night more than anything else is my 2 1/2-year-old son. I don't see anything on the horizon that would indicate there's going to be a recession. One of the strengths of our company today is that we operate stores all over the U.S. and Canada. So while there may be a pocket of a recession, we don't see that as something that's going to blanket the country. And all of the demographic trends, all of the industry trends, are so positive that we don't see anything that's really going to affect us.

We're aware of what our competitors are doing, but we don't spend a lot of time thinking about it because, to be honest, we can't really learn a lot from them.