Home Depot on path to recovery with three-pronged initiative

Jennifer Negley, June 22, 2010


Nantucket, Mass. - The Home Depot discussed the details of its three-pronged strategy to boost business this year and onward during its presentation today at the Jefferies Consumer Confidence conference.
Marvin Ellison, evp, U.S. stores, explained that Home Depot views 2010 as a transitional year, as reflected by the home improvement chain's positive first quarter results.
"For us, we define transitional as sales moving from negative to positive territories. [In the first quarter] we exceeded our internal expectations. We had positive comps in U.S. stores for the first time since the fourth quarter of 2005. We grew transactions and we had year-over-year positive inventory turnover."
Ellison offered an outline of the strategy, which includes: supply chain transformation; merchandise transformation; and customer service.

"From a store operations perspective, each of these initiatives will assist us to drive not only improvements in customer service and simplification of stores. We think it will help us to just drive a better business in general," he said, adding the initiatives will also "continue to allow us to improve our performance and create a better shopping environment for our customers."

The supply chain transformation relates to the rollout of company's new rapid deployment centers (RDC). With 14 in place to date, about 70% of Home Depot's stores are being serviced by these RDCs. The company expects to have all units serviced by RDCs by yearend.

"Our RDC network has dramatically improved the store environment already," Ellison said. "For example, it allows us to shift payroll from just moving freight to taking care of customers. They've improved our in-stock levels to 99%, they've improved our lead times, and they've improved our overall turns. And we think this will continue quarter by quarter."

The merchandising transformation initiative focuses on providing "great value and reestablishing product authority." Specifically, this includes an assortment maintenance tool that allows merchants to set assortments below market level for a more productive inventory and fewer markdowns in seasonal business, and an automated clearance process in which markdowns are applied based on weeks of supply by store to shorten the clearance cycle and reduced clearances.

At the core of the strategy is the customer service initiative, which is broken into two segments: "taking care of associates" with improved benefits; and "taking care of customers," with an easier return process, guaranteed price matching and other bonuses.


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