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Home Depot sticks with "long haul" forecast

9/10/2009

At the Goldman Sachs retailing conference Thursday morning, Home Depot president and CEO Frank Blake addressed the current state of HD and its future plans.

Blake toned down the hype of economic recovery by stating that the sales market for the company isn't necessarily good, but it's less bad. "It's not that it's turned around to positive," he said. While the world's largest home improvement retailer is starting to see gains quarter over quarter, the company is still in its fourth year of negative comparable-store sales.

There are gains in certain markets, but the road to recovery overall is going to be a long haul. "This isn't going to be your typical recovery scenario. There is no line in the sand," he said.

Blake said the real challenge will be gaining back the company's pro customers, who make up more than 30% of HD"s customer base. This will be doubly difficult in the hardest hit markets like California, Arizona, Nevada and Florida, where building has gone into a virtual standstill, he said.

"You have to clear through the inventory of homes before you see improvements in those markets," he said.

But Blake said that the significant contraction in the number of lumber and building material suppliers over the past few years will open up a much larger share of the pro market to Home Depot.

Blake then shifted his focus to the future, which involved new strategies, new technology in distribution and hints at global expansion.

First up, Blake discussed the company's portfolio strategy for merchandising, which he said is already starting to streamline inventory and help keep costs low. A large part of that equation is the Rapid Deployment Centers the company has been building, totaling nine by the end of the month.

"At the end of this quarter we are looking at putting out a new RDC per month," he said. And while Blake said there is limited opportunity for the company to grow domestically, "We do see opportunities for worldwide expansion."

Blake said that the company's ventures in Canada and Mexico have been very successful, and that the company's foothold in China has allowed it to assess the possibilities for expansion in the Asian market. He also said that the Mexican market has opened up growth opportunities into the rest of Central and South America.

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