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News
From GE to Home Depot
December 5, 2000: 7:20 p.m. ET

Robert Nardelli, head of GE Power Systems, to lead hardware retailer
By Staff Writer Chris Isidore
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NEW YORK (CNNfn) - Robert Nardelli, chief executive of General Electric Co.'s Power Systems business and one of the finalists who was passed over to succeed Jack Welch as GE's CEO, was named CEO of Home Depot Inc. instead Tuesday evening.

Nardelli, 52, will succeed Arthur M. Blank, 58, as president and CEO. Blank, one of the founders of the chain of more than 1,000 hardware stores, will join co-founder and company Chairman Bernard Marcus as co-chairman.

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graphicRobert Nardelli, president and CEO of Home Depot Inc., chats with CNNfn.
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The move meant that Nardelli became the second unsuccessful finalist for the top spot at GE to be named to head another component of the Dow Jones industrial average. Earlier Tuesday James McNerney was named CEO of Minnesota Mining and Manufacturing Co. (MMM: Research, Estimates), the diversified manufacturer commonly known as 3M. McNerney had been the head of GE's aircraft engine unit.

Jeffrey Immelt was named Nov. 27 to succeed Welch, one of the nation's most respected CEO's, at the end of next year when he retires. Immelt now runs the GE Medical Systems unit.

Expectations were widespread that whichever two executives did not win the top job at GE would move on to head other leading businesses. While McNerney replaces a CEO who had planned to retirement, Home Depot officials said they moved to create an opening in order to grab Nardelli.

"Realizing that we had a terrific opportunity to add a business superstar to Home Depot, we moved quickly to bring Bob into our company," said a statement from Blank. "Bob's enormous management capability will augment our own world-class retailing team and ideally position Home Depot for substantial growth as we look ahead to meeting our 2004 plan and beyond."

Nardelli will join Blank, Marcus, Kenneth Langone and Milledge Hart III on the company's executive committee, as well take a position on the company's board of directors.

An outsider to the world of retail

Nardelli joined GE in 1971. In 1988, he left the company and joined Case Corporation in Racine, Wis. He returned to GE in 1991 as president and CEO of CAMCO, Inc., GE's Canadian Appliance Manufacturing Co.

"Having been a Home Depot supplier for many years, I am well aware of how the company has established itself as a true retailing leader," said Nardelli in Home Depot's statement.

But one industry expert said that even an executive as qualified as Nardelli could find the world of retail challenging.

"On the one hand he's extremely capable, a very strong manager, administrator and visionary. On the other hand he seems a bit remote from the field," said Kurt Barnard, president of Barnard's Retail Trend Report in Montclair, N.J. "He must absolutely acquire the sense of dealing directly with Mr. and Mrs. Consumer. Can he deal with someone who places an order for $10 rather than $10,000 or $10 million?"

Takes over company in strong position

Barnard said that Home Depot is already a model of a well-run retail chain and not necessarily in need of a top flight manager, as are some other troubled retailers which have recently named new CEO's.

"Blank probably wanted to take life a little more easy. They needed someone, and he (Nardelli) became available," said Barnard.

Blank and Marcus started Home Depot with a single store in Atlanta in 1979. With its innovative "big box" model that stressed low prices and mass quantity purchases over shopper ambiance, the store rapidly grew to become the nation's third largest retailer overall. Today the average Home Depot has 130,000 square feet, and offers between 40,000 and 50,000 products. It was added to the Dow in October of 1999, displacing Sears Roebuck & Co. (S: Research, Estimates)

Barnard said the chain's outlook is "superb." The company recent reiterated earlier guidance that it expects earnings per share to grow between 23 and 25 percent in fiscal 2001, while sales at stores open at least a year, a closely watched retail measure known as same-store sales, are expected to increase in the 3 to 4 percent range.

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But in October the company warned it would miss earnings targets for its fiscal third quarter and full year 2000. The warning sent the stock plunging 28 percent, its biggest drop since the 1987 stock market crash. The company met those reduced expectations for the third quarter, reporting earnings that rose 12 percent from the year-ago period.

Still, the company's position is strong enough to give Nardelli a chance to learn the business without facing an immediate crisis, Barnard said, although he cautioned, "Just remember one thing - the competitive world around Home Depot is changing. Lifestyles are changing. He has stay not just on top of those changes, but a mile ahead of them."

Shares of Home Depot (HD: Research, Estimates) gained $2.38 to $46 in after-hours trading following the Tuesday evening announcement, after closing up $2.88 to $43.63 in regular-hours trading. Shares of GE (GE: Research, Estimates) was unchanged in after-hours trading closing up $2.50 to $54.13 in regular-hours trading. graphic

  RELATED STORIES

3M names new CEO - Dec. 5, 2000

Leading retailers' 3Q in line - Nov. 14, 2000

Home Depot stock sinks - Oct. 12, 2000

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