Atlanta — The Home Depot has decided to jettison its long-struggling EXPO decorator business and said it will cut 7,000 jobs, including about 10 percent of the company’s officer-level staff.
Thirty-four EXPO Design Center stores will be shut over the next two months, along with five YardBIRDS stores, two Design Center stores and HD Bath, a bath remodeling business with seven locations. The closures will result in the layoffs of 5,000 workers, including store-level associates and support and distribution center personnel, the company said.
The home improvement chain said that the EXPO division had underperformed “even during the recent housing boom” and that its prospects for improvement are nil. It said the business, which had targeted the decorator and interior design trade, “has weakened significantly as the demand for big ticket design and decor projects has declined in the current economic environment,” and that continuing the operation would divert focus and resources from the company’s core “orange box” 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,” chairman/CEO Frank Blake, said in a statement. “At the same time, it is a necessary decision that will strengthen our core Home Depot business.”
Separately, the retailer is also restructuring its support functions to reduce costs. Measures include reducing headcount in administrative functions in its store support centers and continuing its shift to a region- and district- based support model in various field functions. The moves will result in pink slips for an additional 2,000 support personnel and 10 percent of the company’s officer ranks. Salaries are also being frozen for remaining officers.
“These changes,” Blake said, “will make us a stronger company and will allow us to continue to grow associate employment over the long term to benefit our customers.”
Home Depot projects that the actions will benefit fiscal 2009 earnings before interest and tax by approximately $305 million, primarily as a result of payroll savings and operational improvements from the shutdown of EXPO.
The chain will likely take a total pre-tax charge of about $532 million, of which approximately $390 million will be recognized in the fourth quarter and the remaining $142 million will be recognized in 2009 and beyond. The charge consists primarily of fixed asset write-offs, lease reserves on closed stores, severance and store closing costs, the company said. The cash component related to severance and store closing costs is projected to be approximately $153 million over the next twelve months, and is expected to be offset by cash received for liquidated inventory.
The chain is sticking to it previous guidance for fiscal 2008 sales, which are expected to fall 8 percent, and for earnings per share from continuing operations, which will likely decline by 24 percent before the charges. Looking ahead, the company anticipates “continued weakness in sales” due to the broader economic downturn, and will reduce capital expenditures to approximately $1 billion in fiscal 2009. It will also limit new store openings to 12 locations this year.