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Home Depot

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The Home Depot, Inc.
Company typePublic (NYSE: HD)
IndustryRetail (Home Improvement)
Founded1978 (Atlanta, Georgia, USA)
FounderBernard Marcus Edit this on Wikidata
HeadquartersVinings, Georgia, USA
Key people
Frank Blake, CEO & Chairman
ProductsHome improvement products such as appliances, tools, hardware,lumber, building materials, paint, plumbing, flooring and garden supplies & plants.
RevenueIncrease$90.837 billion USD (2006)
24,039,000,000 United States dollar (2022) Edit this on Wikidata
Increase$5.761 billion USD (2006)
Number of employees
355,000
Websitewww.homedepot.com

The Home Depot (NYSE: HD) is an American retailer of home improvement and construction products and services.

Headquartered in Vinings, just outside Atlanta in unincorporated Cobb County, Georgia, Home Depot employs more than 355,000 people and operates 2,164 big-box format stores across the United States (including the 50 U.S. states, the District of Columbia, Puerto Rico, the United States Virgin Islands), Canada (ten provinces), Mexico and China.[1] Currently, the world's second largest Home Depot is in its final stages on the island of Guam.

The Home Depot is the largest home improvement retailer in the United States, ahead of rival Lowe's, and the second-largest general retailer in the United States, behind only Wal-Mart. [2]

History

Kicked in the butt with a Golden Horseshoe

While working with Handy Dan hardware stores, Bernie Marcus (division president), Arthur Blank (CFO), and Ron Brill were at odds with the CEO of the parent company, Sandy Sigoloff. Sigoloff ran Daylon corporation, which in turn owned Handy Dan. Marcus thought that because Handy Dan was the only division that was profitable, Sigoloff would not do without him. Around this time, a friend of Marcus and a Park Avenue investment banker, Ken Langone, bought 19% of the public shares in Handy Dan. Sigoloff, resenting any outside influence in his company,despised Langone. Knowing Langone and Marcus were friends, Sigoloff place enormous pressure on Marcus, which made his working life exceptionally difficult.[3] Sometime in 1977, while in Houston, Marcus, through his trust in their friendship, had confided in both Ken Langone and Blank about an idea he had for a type of hardware store-he just did not give any details, simply claiming it would make Handy Dan stores obsolete.

Marcus, Blank, and Brill suffered under Sigoloff more than ever by 1978. Marcus urged Langone to sell his shares of Handy Dan stock, believing this would appease Sigoloff, which in turn would ease the pressure on Marcus. Despite warnings from Langone, Bernie insisted he sell the shares. Once done, Sigoloff prepared himself to not just terminate Marcus and co., but to completely ruin their careers, their finances, and devastate them emotionally. That was Sigoloff's (Ming the Merciless as he thought of himself)[4] way-to totally affect someone's life, so that anyone would think twice about betraying him. Sigoloff planned the termination of Marcus, Blank, and Brill with attorneys and released them on April 14, 1978. Subsequently, Marcus and Blank were despondent about their unemployment. Ken, being the good friend, responded to the news by saying to Marcus over the phone:

"Bernie! You've just been kicked in the ass by a golden horseshoe! This is the greatest opportunity!! Now you can open that hardware store idea you talked about in Houston!"[5]

The Home Depot was founded in 1978 in Atlanta, Georgia by Bernie Marcus, Arthur Blank, Ron Brill, and Pat Farrah. The men envisioned a chain of home-improvement warehouses, larger than any of their competitors' facilities, filled with a vast array of products stacked from the floor to the 20ft ceiling and staffed by customer-service experts. With valuable contributions investment banker Ken Langone, they secured sufficient capital and searched nationwide for a suitable location to found their company. Marcus and Blank opened two stores on June 22, 1979, in Atlanta, which made the city the official home of the Home Depot.

"Bernie and I founded (The Home Depot) with a special vision-to create a company that would keep alive the values that were important to us. Values like respect among all people, excellent customer service and giving back to communities and society."[6]

The stores were a definite success after a fateful purchase decision by Pat Farrah. He had purchased 3000 fireplace screens far below wholesale cost ($33.00), and proposed to sell it at $35.00 per screen, (the normal retail price was $179.00). Although Bernie was furious, and scoffed at the purchase at first, figuring Pat had just killed the company because he just committed $100,000 that the company desperately needed. Marcus eventually agreed to sell it. The next week, the item was advertised and caused a rousing response. They sold every unit within 4 days. This one purchase set the companies sales ablaze.[7]

"We bleed orange!!"

The retail philosophy of a "three legged stool", according to its founders, is Home Depot’s main source of competitive advantage. The stool with three legs, an inherently stable and strong structure, represents: 1) providing consumers with the best selection; 2)guaranteed lowest price; 3) and the best customer service.[8] In addition to the three legged stool retail philosophy, Marcus and Blank also strongly believe in "the upside down pyramid", a graphical way to depict their belief on where they sat in the importance of the companies structure. For example, a right side up pyramid would suggest that the workers importance to the company is at the bottom, with the one director at the top. Their philosophy was just the opposite: they believed the most important person working for the company were the associates in the stores-not in the corporate office. This led to an astounding cultural phenomenon within Home Depot- it enabled a powerful entrepreneurial spirit among all associates, from lot loaders and cashiers to the corporate offices. This "upside down pyramid" focus created such a strong, cult-like culture, within which the employees took it upon themselves to defend customers against Home Depot.

The "Home Depot has never sold, and never will sell, automobile tires", said Marcus in a 1999 interview. But, early in the companies history, a customer brought into one of the first stores 4 automobile tires and demanded a refund. The returns counter associate called Larry Mercer for help. Mercer arrived up front, then asked the gentleman how much he paid for them. After the customer threw out a number, Mercer reached into the register and returned that amount to the customer without another word. To make the point painfully clear to his company of what he demanded of them to earn the customers loyalty, he hung all four tires from the ceiling above the return desk, daring anyone to deny any customer a refund.[9] The "No hassle return policy" was: with or without a receipt, even if Home depot did not carry the item the customer was returning, Home Depot would refund your money--no gimmicks, no tricks. This is but one example how Home Depot associates earned absolute loyalty among Home Depots customers. There are literally thousands of examples of associates going above and beyond customer expectations, going so far to actually "shock" people with the level of service received. This type of ownership in taking care of their customers is the very reason why associates, from bottom to top, declared proudly that they "bleed orange".[10]

Home Depot stores were staffed by knowledgeable professionals in various trades who were able to assist the novice in home improvement. The goal was "if you teach them how to do it, and they are successful, then they will keep coming back for every project after that."[11] Every Home Depot associate underwent extensive and continuous training in product knowledge and customer-service skills. To further assist the do-it-yourself customer, and to bolster sales, the Home Depot stores also provided home-improvement training seminars to the public free of charge.

Meteoric Success

Realizing fantastic sales and returns on investment of goods, Arthur Blank and Marcus and Blank initiated an aggressive yet well-planned expansion program. By 2003 the Home Depot had grown from three stores employing 200 people to more than 1,700 stores employing 300,000 people. Today, a new store opens every 43 hours, and more than 22 million customers visit a Home Depot store each week. The Home Depot's growth is unparalleled in the business community. It was the youngest company to reach $30 billion, $40 billion, $50 billion, and then $60 billion (in 2004) in sales. Critics of the company's meteoric success contend that the Home Depot's aggressive expansion policy unfairly drives smaller, preexisting competitors out of business and creates a monopoly in some markets. Despite such criticism, the company's plans call for continued expansion, especially now that Lowes Home Improvement stores are offering Home Depot adequate competition in every major market in the U.S.

Changing an Industry

Using a unique business model Marcus had envisioned while still at Handy Dan, the company grew rapidly, with sales topping $1 billion annually by 1986. The Home Depot revolutionized the home-improvement industry by offering a wide selection of merchandise, low prices, and exemplary customer service to both the professional contractor and the do-it-yourself customer. Before the advent of Home Depot, small mom-and-pop stores, carrying a limited and specific selection of merchandise, dominated the industry and typically emphasized sales to the professional contractor. As a result, home-improvement projects often required driving to several stores to obtain the necessary materials. By contrast, the Home Depot stores offer a one-stop shopping warehouse. The average Home Depot store is approximately 130,000 square feet and is stocked from floor to ceiling with some 40,000-50,000 different products. An emphasis on size and volume allows the Home Depot to remain profitable by selling more for less. This, in turn, allows the Home Depot to negotiate lower prices from the merchandise vendors, with the savings passed on to the consumer.

Going International

In 1997, Home Depot expanded to Chile and Argentina with unexpected success during these countries' economic booms. But due to labor union influences in countries historically moved by economic socialism (unlike the highly capitalism-oriented economy in Mexico), Home Depot wanted to pull out and avoid conflict of interests with their governments. Home Depot remains active in South America despite the need to sell off 9 of its stores.[12] In 2000, after the retirement of Marcus and Blank, Robert Nardelli was appointed chairman, president, and CEO. Nardelli was replaced in January 2007 by Frank Blake. [13]

The Home Depot today

Distribution of Home Depot stores in the lower 48 states

Home Depot stores are large, averaging 105,000 ft² (9,755 m²) and warehouse-style, stocking a large range of supplies. The company color is a bright orange (PMS 165, CMYK 60M100Y), on signs, equipment and employee aprons.

Its 2006 sales totaled US$90.8 billion. Despite the 10% increase in revenue, it dropped three spots to #17 on the 2007 FORTUNE magazine's FORTUNE 500 list (it was #13 in 2005 and #14 in 2006). The Home Depot also owns EXPO Design Center, a chain of higher-end home decorating and appliance stores. In 2006, The Home Depot acquired Hughes Supply which is to be assimilated into HD Supply serving contractors. In September 2005, Home Depot Direct launched its high-end online home-furnishings store, 10 Crescent Lane, shortly followed by the launch of Paces Trading Company, its high-end online lighting store. In mid 2006, Home Depot acquired Home Decorators Collection which was placed as an additional brand under its Home Depot Direct Division.

On January 2, 2007, Home Depot and Robert Nardelli mutually agreed on Nardelli's resignation as CEO after a six-year tenure. Nardelli resigned amid complaints over his heavy handed management and whether his pay package of $123.7 million, excluding stock option grants, over the past 5 years was excessive considering the stock's poor performance versus its competitor Lowe's. His golden parachute severance package of $210 million has also been criticized because when the stock went down his pay went up.[13] [14] His successor is Frank Blake, who previously served as the company's vice chairman of the board and executive vice president. Shareholders expressed relief at Nardelli's departure but doubt whether the incoming CEO Frank Blake can run a retail business as large as Home Depot.[14] [15]

Board of directors

Current members of the board of directors of Home Depot are: Greg Brenneman, Richard H. Brown, John Clendenin, Claudio González, Milledge Hart, Bonnie Hill, Laban Jackson, Lawrence R. Johnston, Ken Langone, Armando Codina, Tom Salveter and one additional director. The Home Depot's board consists of 12 members, with 11 of them being outside directors. ("The Home Depot Declares Second Quarter Dividend of 22.5 Cents; Names Armando Codina to Its Board of Directors…" (Press release). PRNewswire-FirstCall via COMTEX News Network/ --…. 2007-08-16. Retrieved 2007-08-23. {{cite press release}}: Check date values in: |date= (help))

Marketing

The slogan "You can do it. We can help." has been used by the Home Depot since 2003. Other slogans used in the past 25 years include "The Home Depot, Low prices are just the beginning" in the early 1990s and "When you're at the Home Depot, You'll feel right at home" in the late 1990s and "The Home Depot: First In Home Improvement!" from 1999-2003.

Exclusive brands

The Home Depot carries several exclusive brands, including:

Fuel Centers

Starting in 2006, Home Depot has started testing with Fuel Centers at some of its stores. The first centers located in Hermitage and Brentwood (both in Tennessee), and Acworth, Georgia are expected to earn $5-$7 million per year. The fuel centers sell beer, hot food, snacks along with providing diesel at a separate island. This allows contractors with large trucks to be able to fill their vehicles. The fuel centers also offer car washes, which are large enough to accommodate full size pickups.

Home Depot construction toys

Home depot also has its own brand of construction toys, but are sold exclusively at Toys R Us.

Social and Community Philanthropy

"The company is also dedicated to giving back to the community and donates time, labor, money, and supplies to numerous charities, totaling more than $200 million in contributions. The Home Depot Foundation, established in 2002, supports a variety of community projects, including Habitat for Humanity; City of Hope, a California-based cancer-treatment center; and KaBOOM!, a playground-construction organization.[16]

Environmental record

Home Depot has stated on their website that they have a commitment "to the environment and pledge to continue to be an industry leader in looking for products and services that are respectful of our world."[17] Home Depot has worked with environmental groups to develop a variety of green programs, like offsetting carbon emissions from its headquarters by planting thousands of trees in Atlanta.[18]

In April 2007 Home Depot announced its own label, Eco Option, for nearly 3,000 products, from fluorescent light bulbs that conserve electricity and natural insect killers, to sustainable forestry and clean water practices. The idea is that the brand name will identify the products as environmentally friendly. The initiative is expected to include 6,000 products by 2009, representing 12 percent of the chain's sales.[18]

Major sponsorships

Home Depot storefront, older design,Yonkers, New York
Home Depot storefront, newer design, Houston, Texas

Since 1991, the company has become a large supporter of athletics, sponsoring the United States and Canadian Olympic teams, and launching a program which offered employment to athletes that accommodates their training and competition schedules. While remaining supportive of Canadian Olympians, Home Depot ceased to be a sponsor of the Canadian Olympic Team in 2005.

Company co-founder Blank also purchased the Atlanta Falcons franchise of the National Football League in February 2002. The Home Depot is also the primary sponsor of two time NASCAR Champion (2002, 2005) Joe Gibbs Racing. NASCAR driver Tony Stewart drives The Home Depot #20 Chevrolet Monte Carlo SS/Impala SS. The Home Depot is also the title sponsor of The Home Depot Center in Carson, California, home to both the Los Angeles Galaxy and Chivas USA of (Major League Soccer), and Los Angeles Riptide (Major League Lacrosse), and many past major sporting events.

In October 2006, The Home Depot partnered with Duke University to create “The Home Depot Smart Home,” a residential laboratory where Duke students will research and develop innovative solutions for the home in areas such as security and home monitoring, communications, energy efficiency, entertainment, environment and health.[19]

In January 2007, The Home Depot became the official Home Improvement sponsor of the National Football League.[20]

Seventy-three percent of Home Depot's campaign contributions went to Republican candidates in the 2005-2006 US elections. "Home Depot's PAC gives money based on a candidate's voting record, committee assignment and leadership position," said company spokesman Jerry Shields.[21] The CEO in this period was Bob Nardelli, a friend of Bush.[22] Nardelli hosted a garden reception/fundraiser for Bush at his Atlanta home on May 20, 2004[23]

The Home Depot internationally

Home Depot Canada is the Canadian unit of Home Depot and one of Canada's top home improvement retailers. The Canadian operation consists of 159 stores and employs over 30,000 people in Canada. Home Depot Canada has stores in all ten Canadian provinces and serves territorial Nunavut, Northwest Territories, and Yukon through electronic means (Online and catalog sales).

The Canadian unit was created with the purchase of Aikenhead Hardware. Home Depot management has an ambitious plan to overtake its biggest competitor, Rona, which has about four times as many stores. However, many of Rona's stores are smaller than the typical Home Depot store. In terms of big box stores, Home Depot has many more stores than Rona. Home Depot will also face competition from Lowe's as they move into the Canadian market in 2007; Lowe's first Canadian outlets will be located in Ontario.

Mexico

Home Depot store in Mexico City, Mexico

The Home Depot entered Mexico in 2001, and has since become one of the largest retailers in Mexico, operating more than 50 stores with over 6,600 employees. Most of the Home Depot stores are located in the same installations in which the extinct Home Marts were located. Border town Home Depots attract some American consumers to make their US dollar go further in purchases of mostly same home improvement products in Home Depots of Tijuana, Mexicali, Ciudad Juarez, Nuevo Laredo and Matamoros. In 2006, Home Depot began a program to offer Mexican employees to have "guest worker" incentives for Mexican nationals and Latin Americans to easily, but legally obtain employment in Home Depots across the US. [citation needed]

China

In December 2006, The Home Depot announced its acquisition of the Chinese home improvement retailer The Home Way.[24] The acquisition gave The Home Depot an immediate presence in China, with 12 stores in six cities. Although China is ruled by the communist party, the government allows Home Depot to further deregulate its practices, decide on matters liberally on employee benefits and labor union membership in a socialist country.[clarify]

Labor Union Policies

The Home Depot has a strong "union-free" policy like other major retail companies (Wal-Mart blazed the trail for over 40 years). Home Depot had nine stores across South America from 1997 to 2002, but aborted expansion for new stores by 2003 due to the region's economic downturn (recession), left-wing government intervention and labor union influences.[citation needed]

Criticism

Fox News Advertising

"Activists are urging Home Depot, which recently unveiled an environmentally conscious marketing program, to withdraw advertising from Fox News, whose hosts and commentators dismiss global warming as liberal hysteria."[25]

Loss Prevention company policy

In 2007, Dustin Chester of the Murfreesboro store in Tennessee was fired for apprehending a suspected thief. Chester was employed with the company for 7 years, and was a department manager in the store. He confronted a man holding a wad of cash and brandishing a crowbar. The man ran and Chester pursued, catching the man in the parking lot then holding him until police arrived. Chester was terminated by the company for confronting the thief, giving chase then detaining. The company policy states that associates should not confront thieves, but instead inform a salaried manager and/or loss prevention supervisor. Home Depot states the company policy is intended to protect customers and employees alike from a possible escalating situation. "The associates involved were not following company policy, resulting in this disciplinary action," said Don Harrison, spokesman for the Atlanta-based company. "Safety is a primary focus for our company." Chester claims in his seven years he has never heard of the policy[26]

Whistleblower Case

Home Depot currently is embroiled in whistleblower litigation brought under the Sarbanes-Oxley Act (SOX) law. In July 2005, former employee Michael Davis, represented by attorney Mark D. Schwartz, Esq., filed a whistleblower lawsuit against Home Depot, alleging that his discharge was in retaliation for refusing to make unwarranted chargebacks against vendors. Davis alleges that Home Depot forced its employees to meet a set quota of chargebacks to cover damaged or defective merchandise, forcing employees to make chargebacks to vendors for merchandise that was undamaged and not defective. Home Depot alleges that it fired Davis for repeatedly failing to show up for work.

The trial initially was concluded in June 2006, but in April 2007, U.S. Department of Labor Judge Pamela Lakes Wood ordered the case reopened after Home Depot's law firm Akin Gump Strauss Hauer and Feld revealed that the retail giant's in-house counsel had told them that two Home Depot employees who testified at the trial had lied. Akin Gump sent Wood a letter on September 29, 2006 letter, in which the law firm requested that the testimony be stricken. In response to Akin Gump's revelation, Davis' attorney Mark D. Schwartz asked for the case to be reopened to permit further questioning of the witnesses. On April 6, 2007, Wood ordered the case to be reopened. The judge fundamentally sided with Schwartz, reopening the case so that Davis would receive "a full and fair hearing."

Schwartz believes that the witnesses who falsely denied that they had ever been asked to enter false return-to-vendor information gave false testimony under pressure from Home Depot. Schwartz was quoted by the New York Post as saying, "I have reason to believe these witnesses were intimidated into giving false testimony." Home Depot's response to Schwartz's allegations were "meritless." "Home Depot Case Revived", by Suzanne Kapner New York Post (April 12, 2007)

References

  1. ^ "News Releases". The Home Depot. November 17, 2006.
  2. ^ Top 100 Retailers: The Nation's Retail Power Players (PDF), Stores, July 2006.
  3. ^ Bernie Marcus and Arthur Blank with Bob Andelman, Built from Scratch: How a Couple of Regular Guys Grew The Home Depot from Nothing to $30 Billionp.30 (New York: Times Books, 1999).
  4. ^ Bernie Marcus and Arthur Blank with Bob Andelman, Built from Scratch: How a Couple of Regular Guys Grew The Home Depot from Nothing to $30 Billionp20 (New York: Times Books, 1999).
  5. ^ Bernie Marcus and Arthur Blank with Bob Andelman, Built from Scratch: How a Couple of Regular Guys Grew The Home Depot from Nothing to $30 Billion p.37 (New York: Times Books, 1999).
  6. ^ Roush, Chris "Inside Home Depot" McGraw Hill
  7. ^ Bernie Marcus and Arthur Blank with Bob Andelman, Built from Scratch: How a Couple of Regular Guys Grew The Home Depot from Nothing to $30 Billionp.86 (New York: Times Books, 1999).
  8. ^ (Marcus and Blank 1999)
  9. ^ Bernie Marcus and Arthur Blank with Bob Andelman, Built from Scratch: How a Couple of Regular Guys Grew The Home Depot from Nothing to $30 Billion p.144 (New York: Times Books, 1999).
  10. ^ Roush, Chris "Inside Home Depot" McGraw Hill
  11. ^ Roush, Chris "Inside Home Depot" McGraw Hill
  12. ^ "Home Depot Finds The World A Small Place". Forbes.com. March 21, 2002.
  13. ^ a b "News Releases". The Home Depot. January 3, 2007.
  14. ^ a b "Home Depot's Surprising Choice for CEO". Business Week. January 4, 2007.
  15. ^ "Nardelli Bails On Home Depot". Forbes.com. January 3, 2007.
  16. ^ Bailey,M. Georgia College and State University",http://www.georgiaencyclopedia.org/nge/Article.jsp?id=h-1886&sug=y
  17. ^ "Business Code of Conduct and Ethics". Home Depot.
  18. ^ a b "Home Depot to Display an Environmental Label". stopglobalwarming.org. April 17, 2007.
  19. ^ "Duke Announces Construction of "The Home Depot Smart Home"". Duke University. October 24, 2006.
  20. ^ "The Home Depot Becomes an Official NFL Sponsor". The Home Depot. January 9, 2007.
  21. ^ "Republican Candidates Increase Share of Business PAC Donations". Bloomberg.com. August 8, 2006.
  22. ^ "Nardelli resigns abruptly as CEO of Home Depot, leaves with $210M". AP.com. Jan 3, 2007.
  23. ^ *article that mentions Bush Nardelli Garden Reception.
  24. ^ "The Home Depot acquires The Home Way". PR News Wire. December 13, 2006.
  25. ^ "Home Depot Refuses to Drop Ads on Fox News". NY Times. July 30, 2007.
  26. ^ ."Home Depot employee looking for job after stopping alleged thief". Tennessean. August 29, 2007.
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